Dry Bulk Market’s Prospects Remain Positive, Despite Short-Term Challenges says EuroDry Ltd.

EuroDry Ltd., an owner and operator of drybulk vessels and provider of seaborne transportation for drybulk cargoes, announced its results for the three and nine-month periods ended September 30, 2023.

Third Quarter 2023 Highlights:

Total net revenues for the quarter of $10.0 million.

Net loss of $0.5 million or $0.19 loss per share basic and diluted.

Adjusted net loss for the quarter of $0.7 million, or, $0.24 per share basic and diluted.

Adjusted EBITDA was $3.1 million.

An average of 10.0 vessels were owned and operated during the third quarter of 2023 earning an average time charter equivalent rate of $12,126 per day.

As of November 8, 2023 we had repurchased 268,490 shares of our common stock in the open market for about $4.0 million (approximately 9.7% of our currently outstanding shares), under our share repurchase plan initiated in August 2022.

On September 12, 2023 we announced our agreement to acquire three Ultramax bulkers, M/V Christos K (ex-Giants Causeway), a 63,197dwt drybulk vessel built in 2015, M/V Maria (ex-Sadlers Wells), a 63,153 dwt drybulk vessel also built in 2015, and M/V Yannis Pittas (ex-Galileo), a 63,177 dwt dry bulk vessel built in 2014 for a total price of $65 million.

Nine Months 2023 Highlights:

Total net revenues of $31.7 million.

Net loss of $3.3 million, or $1.17 loss per share basic and diluted.

Adjusted net loss for the period was $1.6 million or $0.57 loss per share basic and diluted, before unrealized loss on derivatives.

Adjusted EBITDA was $8.0 million.

An average of 10.0 vessels were owned and operated during the first nine months of 2023 earning an average time charter equivalent rate of $11,644 per day.
Recent developments

On October 10, 2023 we took delivery of M/V Yannis Pittas. The consideration was partly paid by cash at-hand and partly financed with a sustainability-linked loan for $10.5 million with Eurobank S.A.

On October 25, 2023 we took delivery of M/V Christos K. The consideration was partly paid by cash at-hand and partly financed with a sustainability-linked loan for $11.0 million with Eurobank S.A.

On October 26, 2023, we announced that we formed a joint venture with a number of investors represented by NRP Project Finance AS (“NRP Investors”) regarding the ownership of M/V Christos K and M/V Maria, whereby NRP Investors will acquire a 39% ownership stake in each of the vessels.

On November 6, 2023, we took delivery of M/V Maria. The consideration was partly paid by cash at-hand and partly financed with a sustainability-linked loan for $11.0 million with Eurobank S.A.

Aristides Pittas, Chairman and CEO of EuroDry commented: “During the third quarter of 2023, average time charter rates for the sizes of vessels and related Baltic indices staged a come-back increasing by more than 20% and 75%, respectively, by the end of the quarter. However, since the end of the third quarter, rates and index values slid down by 5% to 15% depending on rate type and vessel size. These developments partly reflect the seasonal market strength during the September and October months as well as certain constraints imposed by climate-related reasons like the capacity restriction of the Panama Canal due to low fresh water levels.

“Looking forward, we see that world economic growth is affected by the effort of the main central banks to contain inflation. At the same time, the increasing geo-political tensions (like the Ukraine-Russia war and the Israeli-Hamas conflict) introduce additional uncertainty in the world markets, affecting seaborne trade. Against this rather uncertain demand picture, the likely drybulk fleet developments over the next 2-3 years provide a reason for optimism as the continuing historically low orderbook as percentage of the fleet and the effect of the implementation of the greenhouse gas emission regulations on the ability of certain vessels to continue trading are expected to keep the fleet supply growth at low levels. Assuming that global GDP growth remains positive as expected by most analysts and a global recession is avoided, we would expect that market rates and vessel prices will be supported.

“We are very pleased to have taken the opportunity to take advantage of the softening of vessel prices we witnessed during the summer to increase our fleet with three eco Ultramax vessels. We are also very pleased to have achieved this growth in partnership with certain shipping savvy Norwegian investors who participated in the investment with a 39% interest in of two of them. This way of funding our fleet growth is non-dilutive to our shareholders and establishes us as an investment partner amongst other private investors. It allows us to capitalize on accretive investment opportunities in the market and grow our fleet more than we could otherwise. We believe that we serve our shareholders best via a mix of acquisitions like the above and, also, by continuing to repurchase our shares as they trade significantly below our net asset value level.”

Tasos Aslidis, Chief Financial Officer of EuroDry commented: “Comparing our results for the third quarter of 2023 with the same period of 2022, our net revenues decreased by about $5.8 million, due to the lower time charter equivalent rates our vessels earned as compared to the third quarter of 2022. The time charter equivalent rates for the period were lower by 41% on average compared to the time charter equivalent rates our vessels earned in the third quarter of 2022. Operating expenses, including management fees, increased from $5,893 per vessel per day in the third quarter of 2022 to $6,003 in the third quarter of 2023. The increase is primarily attributable to inflationary increases in 2023 compared to the corresponding period in 2022. General and administrative expenses averaged $677 per vessel per day during the third quarter of 2023 as compared to $700 per vessel per day for the same quarter of last year and $813 per vessel per day for the first nine months of 2023 as compared to $750 per vessel per day for the same period of 2022. The increase in the nine months period is due partly to inflation adjustments and partly to the lower number of vessels we operated during the nine months of 2023 as compared to 2022.

Adjusted EBITDA during the third quarter of 2023 was $3.1 million compared to $9.5 million achieved for the third quarter of last year. As of September 30, 2023, our outstanding debt (excluding the unamortized loan fees) was $75.0 million while unrestricted and restricted cash was $34.0 million. As of the same date, our scheduled debt repayments including balloon payments over the next 12 months amounted to about $15.9 million (excluding the unamortized loan fees) and all our loan covenants are satisfied.”

Third Quarter 2023 Results:
For the third quarter of 2023, the Company reported total net revenues of $10.0 million representing a 36.7% decrease over total net revenues of $15.8 million during the third quarter of 2022, which was primarily the result of the lower time charter rates our vessels earned in the third quarter of 2023 compared to the corresponding period of 2022. The Company reported net loss for the period of $0.5 million, as compared to a net income of $6.2 million for the same period of 2022.

On average, 10.0 vessels were owned and operated during the third quarter of 2023 earning an average time charter equivalent rate of $12,126 per day compared to 11.0 vessels in the same period of 2022 earning on average $20,637 per day.

For the third quarter of 2023, a gain on bunkers resulted in positive voyage expenses of $0.1 million, as compared to a gain on bunkers for the same period of 2022 of $2.0 million. Vessel operating expenses were $4.7 million for the third quarter of 2023 as compared to $5.2 million for the same period of 2022. The decrease is attributable to the decreased number of vessels operating in the third quarter of 2023 compared to the corresponding period in 2022. Depreciation expense for the third quarter of 2023 amounted to $2.6 million, compared to $2.9 million for the same period of 2022. This decrease is again due to the lower number of vessels operating in the third quarter of 2023 as compared to the same period of 2022. General and administrative expenses decreased to $0.6 million in the third quarter of 2023, as compared to $0.7 million in the third quarter of 2022. This decrease is mainly attributable to the decreased legal costs of the Company in the third quarter of 2023 compared to the same period of 2022. During the third quarter of 2023, one of our vessels completed her special survey with drydocking for a total cost of $0.8 million. During the third quarter of 2022, two of our vessels completed their special survey with drydocking and one of our vessels commenced drydocking within the quarter in order to pass her special survey, which was completed in the fourth quarter of 2022, for a total cost of $2.7 million.

Interest and other financing costs for the third quarter of 2023 amounted to $1.6 million compared to $1.0 million for the same period of 2022. Interest expense during the third quarter of 2023 was higher mainly due to the increased benchmark rates of our loans during the period as compared to the same period of last year. For the three months ended September 30, 2023, the Company recognized an unrealized gain of $0.14 million and a realized gain of $0.05 million on an interest rate swap contract. For the three months ended September 30, 2022, the Company recognized an unrealized gain of $1.0 million and a marginal realized loss on five interest rate swap contracts and a gain of $0.6 million on forward freight agreement (“FFA”) contracts entered into during the second quarter of 2022 and settled during the third quarter of 2022, comprising a realized gain of $1.1 million and a change in fair value of FFA contracts of $0.5 million. Interest income for the third quarter of 2023 amounted to $0.3 million compared to marginal interest income for the same period of 2022. The increase of interest income is attributable to both higher interest rates earned and higher cash balances maintained during the third quarter of 2023 compared to the corresponding period in 2022.

Adjusted EBITDA for the third quarter of 2023 was $3.1 million compared to $9.5 million achieved during the third quarter of 2022.

Basic and diluted loss per share for the third quarter of 2023 was $0.19 basic and diluted calculated on 2,758,013 basic and diluted weighted average number of shares outstanding, compared to earnings per share of $2.11 basic and $2.10 diluted, calculated on 2,925,799 basic and 2,930,909 diluted weighted average number of shares outstanding for the third quarter of 2022.

Excluding the effect on the loss for the quarter of the unrealized gain on derivatives, the adjusted net loss for the quarter ended September 30, 2023 would have been $0.24 per share basic and diluted, compared to adjusted earnings of $1.94 and $1.93 per share basic and diluted, respectively, for the quarter ended September 30, 2022. Usually, security analysts do not include the above item in their published estimates of earnings per share.

First Nine Months 2023 Results:

For the first nine months of 2023, the Company reported total net revenues of $31.7 million representing a 42.4% decrease over total net revenues of $55.1 million during the first nine months of 2022, which was mainly the result of the decreased number of vessels operated and the significantly lower time charter rates our vessels earned during the nine-month period of 2023 compared to the same period of 2022. The Company reported net loss for the period of $3.3 million, as compared to a net income of $27.3 million, for the nine-month period of 2022.

On average, 10.0 vessels were owned and operated during the first nine months of 2023 earning an average time charter equivalent rate of $11,644 per day compared to 10.5 vessels in the same period of 2022 earning on average $22,876 per day.

For the nine months of 2023, voyage expenses, net, were $3.4 million and mainly relate to expenses incurred by one of our vessels while employed under a voyage charter and expenses during the detention of one of our vessels in Corpus Christi. For the nine months of 2022 a gain on bunkers resulted in positive voyage expenses of $2.9 million. Vessel operating expenses were $14.8 million for the nine months of 2023 as compared to $14.4 million for the same period of 2022. The increase is primarily attributable to inflationary increases in 2023 compared to the corresponding period in 2022. Related party management fees for the first nine months of 2023 were slightly increased to $2.3 million from $2.2 million for the same period of 2022 as a result of an adjustment for inflation in the daily vessel management fee, effective from January 1, 2023, increasing the daily vessel management fee from 720 Euros to 775 Euros, partly offset by the favorable movement of the euro/dollar exchange rate and the decreased number of vessels owned and operated during the period. Depreciation expense for the first nine months of 2023 was $7.7 million compared to $8.2 million during the same period of 2022, mainly due to the lower number of vessels operating in the recent period. General and administrative expenses increased to $2.2 million during the first nine months of 2023 as compared to $2.1 million in the same period of last year. This increase is mainly attributable to the increased cost of our stock incentive plan. In the first nine months of 2023, three of our vessels completed their special survey with drydocking for a total cost of $2.9 million. During the same period of 2022, four vessels underwent special survey, one vessel passed her intermediate survey in water (in lieu of drydock) and one of our vessels commenced drydocking within the quarter in order to pass her special survey, which was completed in the fourth quarter of 2022. The total drydocking cost for that period was $4.4 million. Finally, during the nine months period of 2023, we recorded a provision of $0.5 million for anticipated costs related to the detention of one of our vessels in Corpus Christi presented as other operating loss.

Interest and other financing costs for the first nine months of 2023 amounted to $4.4 million compared to $2.4 million for the same period of 2022. Interest expense during for the period was higher mainly due to the increased benchmark rates of our loans during the period as compared to the same period of last year. For the nine months ended September 30, 2023, the Company recognized a $1.6 million unrealized loss and a $1.9 million realized gain on four interest rate swaps, three of which were terminated early in the first quarter of 2023, as well as a $2.5 million gain on FFA contracts. For the nine months ended September 30, 2022, the Company recognized a $2.2 million unrealized gain and a $0.2 million realized loss on five interest rate swaps and a $1.1 million realized gain on FFA contracts entered into during the second quarter of 2022 and settled during the third quarter of 2022. Interest income for the first nine months of 2023 amounted to $0.7 million compared to marginal interest income for the same period of 2022. The increase of interest income is attributable to both higher interest rates earned and higher cash balances maintained during the first nine months of 2023 compared to the corresponding period in 2022.

Adjusted EBITDA for the first nine months of 2023 was $8.0 million compared to $35.9 million achieved during the first nine months of 2022.

Basic and diluted loss per share for the first nine months of 2023 was $1.17, calculated on 2,773,916 basic and diluted weighted average number of shares outstanding, compared to earnings per share of $9.43 basic and $9.34 diluted, calculated on 2,890,771 basic and 2,918,800 diluted weighted average number of shares outstanding for the same period of 2022.

Excluding the effect of the change in the fair value of derivatives on the loss for the first nine months of the year, the adjusted net loss for the nine-month period ended September 30, 2023 would have been $0.57 per share basic and diluted, compared to adjusted earnings per share of $8.69 basic and $8.60 diluted for the same period in 2022. As previously mentioned, usually, security analysts do not include the above item in their published estimates of earnings per share.
Source: EuroDry Ltd.