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Dry Bulk Market’s Volatility to Prevail in the Short Term says Castor Maritime Inc.

Castor Maritime Inc., a global shipping company specializing in the ownership of dry bulk vessels, today announced its results for the three months and nine months ended September 30, 2020.

Highlights of the Three Months Ended September 30, 2020:

• Revenues, net: $2.8 million for the three months ended September 30, 2020, as compared to $1.2 million for the three months ended September 30, 2019, or a 133% period to period increase;
• Net (loss)/income: Net loss of $580,153 for the three months ended September 30, 2020, as compared to net income of $244,229 for the three months ended September 30, 2019;
• Loss per share: 0.47 cent loss per share for the three months ended September 30, 2020, as compared to a loss per share of 2 cents for the three months ended September 30, 2019;
• EBITDA(1): $0.1 million for the three months ended September 30, 2020, as compared to $0.5 million for the three months ended September 30, 2019, or a 80% period to period decrease;
• Average fleet time charter equivalent (“TCE”)(1) of $8,081 per day for the three months ended September 30, 2020, as compared to $10,412 for the three months ended September 30, 2019, or a 22% period to period decrease;
• Cash and restricted cash of $38.1 million as of September 30, 2020, as compared to $5.1 million as of December 31, 2019, or a 654% period to period increase;
• On July 29, 2020, announced the acquisition of the M/V Magic Horizon, a 2010 Japan-built Panamax dry bulk carrier for a purchase price of $12.75 million from an unaffiliated third-party seller. The M/V Magic Horizon was delivered to us on October 9, 2020; and
• On October 1, 2020, announced the acquisition of the M/V Magic Nova, a 2010 Japan-built Panamax dry bulk carrier for a purchase price of $13.86 million from an unaffiliated third-party seller. The M/V Magic Nova was delivered to us on October 15, 2020.

Earnings Highlights of the Nine Months Ended September 30, 2020:

• Revenues, net: $8.1 million for the nine months ended September 30, 2020, as compared to $3.1 million for the nine months ended September 30, 2019, or a 161% period to period increase;
• Net (loss)/income: Net loss of $984,621 for the nine months ended September 30, 2020 which includes one off non-cash interest expenses of $1,071,424, as compared to net income of $560,801 for the nine months ended September 30, 2019;
• Loss per share: 2 cents loss per share for the nine months ended September 30, 2020, as compared to a loss per share of 57 cents for the nine months ended September 30, 2019;
• EBITDA(1): $2.1 million for the nine months ended September 30, 2020, as compared to $1.1 million for the nine months ended September 30, 2019, or a 91% period to period increase; and
• Average fleet TCE(1) of $9,492 per day for the nine months ended September 30, 2020, as compared to $10,203 for the nine months ended September 30, 2019, or a 7% period to period decrease.

(1) EBITDA and TCE rates are not recognized measures under United States generally accepted accounting principles (“U.S. GAAP”). Please refer to Appendix B of this press release for the definition and reconciliation of these measures to the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP.

Earnings Commentary:

Third Quarter ended September 30, 2020 and 2019 Results

Time charter revenues, net of charterers’ commissions, for the three months ended September 30, 2020, increased to $2.8 million from $1.2 million in the same period of 2019, or a 133% increase. This increase reflects (i) the operation for a full quarter in 2020 of the M/V Magic Sun versus an approximate 26 days operation in the corresponding period of 2019, as the vessel was acquired on September 5, 2019, (ii) the operation for a full quarter in 2020 of the M/V Magic Moon that was added to our fleet on October 20, 2019 and (iii) the operation for approximately 54 days in 2020 of the M/V Magic Rainbow that was added to our fleet on August 8, 2020. These additions correspondingly increased our Available days (defined below) from 115 for the three months ended September 30, 2019 to 297 for the three months ended September 30, 2020, thus generating incremental revenues in the latter period. The daily TCE of our fleet for the third quarter of 2020 stood at $8,081, as compared to a daily TCE of $10,412 earned during the same period ended September 30, 2019, or a 22.4% decrease, reflecting primarily (i) the lower average charter hire rates earned by our fleet in the three months ended September 30, 2020 compared to those earned by the M/V Magic P in the same period of 2019 given their exposure, when faced with charter renewal, to a charter market adversely affected by the COVID-19 pandemic, (ii) increased voyage expenses on the M/V Magic Sun and the M/V Magic Moon and (iii) bunkers ballast consumption on the M/V Magic Sun and the M/V Magic Moon during periods of port stay in order to effectuate the necessary crew changes amid the Covid-19 pandemic.

The increase in operating expenses by $1.2 million, from $0.6 million in the third quarter of 2019 to $1.8 million in the third quarter of 2020 as well as the increased depreciation and amortization costs by $241,987, from $206,462 in the third quarter of 2019 to $448,449 in the third quarter of 2020 reflect, as discussed above, the growth of our fleet following the acquisition of the M/V Magic Sun, the M/V Magic Moon and the M/V Magic Rainbow that correspondingly increased our Ownership days (defined below) from 118 in 2019 to 330 in 2020. Daily vessel operating expenses for the period increased by $373, or 7.5%, to $5,349 from $4,976 in the respective period of 2019. Contributing to this increase were principally (i) the increased spare and repair costs incurred on the M/V Magic P and (ii) the pre-operating expenses incurred by the M/V Magic Rainbow following its delivery to the Company.

Management fees in the third quarter of 2020 amounted to $207,000, whereas, in the same period of 2019, management fees totaled $42,440. The increase by $164,560, or 387.7%, in management fees reflects (i) our incremental Ownership days for which our managers charge us with a daily management fee, following the acquisitions discussed above (ii) the increase, effective September 1, 2020, in our daily management fees for the technical management of our fleet from $500 to $600 per vessel and (iii) the establishment, effective September 1, 2020, of a daily fee of $250 per vessel for the provision of the relevant services by our commercial and administration manager.

Daily company administration expenses were $891 in the quarter ended September 30, 2020, compared to $832 in the corresponding period of 2019, with the daily increase of $59, or 7.1%, stemming from the incremental flat fees we pay our commercial and administration manager with effect from September 1, 2020.

During the third quarter of 2020, we incurred net interest costs and finance costs mostly in connection with our outstanding debt amounting to $259,156 (which also included the non-cash recurring amortization expenses related to deferred financing costs aggregating to the amount of $29,514) and had average outstanding indebtedness of $19.3 million. During the same period in 2019, we had average outstanding indebtedness of $1.5 million which further explains the lower interest and finance costs of $18,122 incurred during that period.

EBITDA for the three months ended September 30, 2020 was $0.1 million compared to $0.5 million in the same period of 2019, with the decrease mainly attributable to the above discussed period-to-period variations.

Recent Business and Financial Developments Commentary:

Update on COVID-19 Impact

The COVID-19 pandemic continues to cause turbulence in the shipping industry, particularly in the dry bulk sector. Despite the fact that the dry bulk spot charter market has seen a relative rebound in charter rates towards the end of the second quarter of 2020 versus the first quarter of 2020, and despite our belief that we have been able to re-charter our open-for-renewal vessels at improved rates compared to the prevailing market rates, we assess that the dry bulk charter rates in general and our Company specifically, are likely to continue to be exposed to volatility in the near term. Indicatively, three of our vessels which came up for charter renewal in the first, second and third quarters of 2020 were employed at comparably less favorable charter rates than those achieved during 2019 and those expected before the COVID-19 pandemic.

Further, containment measures and quarantine restrictions adopted by many countries worldwide have caused significant impact on our ability to embark and disembark crew members and on our seafarers themselves. As a result, during the second and third quarters of 2020, we have encountered certain prolonged delays embarking and disembarking crew onto our ships. The significant hurdles faced with crew changes and repatriation of seafarers has further led to a growing humanitarian crisis as well as significant concerns for the safety of seafarers and shipping. Despite operating these last several months in uncharted waters, we try to become agile and adaptable to this changing situation, and focus on building effective response strategies and plans, while maximizing efforts to provide our customers with uninterrupted operations.

We believe that the weeks and months ahead will still be crucial and we intend to continue to vigilantly monitor the situation and any potential impact on our business with the utmost care for all our stakeholders.

Acquisition of the M/V Magic Nova

On September 28, 2020, we entered into an agreement to acquire the M/V Magic Nova, a 2010 Japanese-built Panamax dry bulk carrier for a gross purchase price of $13.86 million from an unaffiliated third-party seller. On October 15, 2020, we took delivery of the M/V Magic Nova and, on October 17, 2020, the M/V Magic Nova commenced employment under a period time charter with an expected term of between 6 to 9 months at a gross daily charter hire rate of $10,400.

Following delivery of this vessel, the number of the vessels in our fleet increased to six (6) Panamax dry bulk carriers and the size of our fleet has increased by 200% since September 30, 2019.

Management Commentary:

Mr. Petros Panagiotidis, Chief Executive Officer and Chief Financial Officer of Castor commented:

“The third quarter of 2020 was a transformational one for our Company, as we were able to raise substantial capital and put it to use very quickly by taking advantage of several attractive vessel acquisition opportunities presented to us. At the same time, we were able to charter our redelivered vessels at, on average, higher levels, setting the stage for improved profitability in the near term. While the COVID-19 pandemic still affects our industry and causes overall uncertainty, we believe that our conservative and disciplined growth strategy will produce positive long-term benefits for our shareholders.”

Liquidity / Financing / Cash Flow Commentary:

As of September 30, 2020, total cash amounted to $38.1 million, which included $0.5 million of minimum cash liquidity required under our $11.0 million secured term loan financing entered into in November 2019. The significant improvement of our consolidated cash position as of September 30, 2020, by approximately $33.1 million, in relation to our cash position as of December 31, 2019, was mainly the result of us concluding (i) an underwritten public offering of common shares and warrants in June of this year and (ii) a registered direct offering of common shares with a concurrent private placement of warrants in July of this year, both of which resulted in net cash proceeds to the Company of $34.2 million, as well as our entry into certain financing arrangements within the first quarter of 2020, as further discussed below. Between June 26, 2020 and September 30, 2020, there were also subsequent exercises of 3,019,500 warrants from the underwritten public offering of June which resulted in the issuance of an equivalent number of common shares and proceeds to the Company of approximately $1.1 million.

As of September 30, 2020, pursuant to the entering within the first quarter of 2020 into one commercial secured credit facility amounting to $4.5 million, our total debt (including $5.0 million of related party debt which matures in March 2021, gross of unamortized deferred loan fees) was $19.0 million of which $7.2 million was repayable within one year, as compared to $16.0 million of debt having been incurred as of December 31, 2019. During the first quarter of 2020, we also issued three convertible debentures in original principal amounts of $2.0 million, $1.5 million and $1.5 million each, which, as of June 8, 2020, were all converted into our common shares, and thus, do not require any cash outlay from us.

During the three months ended September 30, 2020, net cash provided from operating activities was $0.1 million as compared to $0.3 million provided in the corresponding period of 2019, which represents a decrease in cash provided by operating activities of $0.2 million, or by 67%. Net cash from operating activities in the three-month period ended September 30, 2020, consisted of net loss after non-cash items of $0.1 million and working capital inflow of $0.2 million, whereas, in the corresponding quarter of 2019, net cash from operating activities consisted on net income after non-cash items of $0.5 million and working capital outflow of $0.2 million. The decrease in net cash provided from operating activities in the third quarter of 2020 versus the same period of 2019 is therefore the aggregate result of the decrease in our net income (irrespective of the increase of non-cash items), as discussed in the Earnings Commentary part of this press release. As of September 30, 2020, we reported a working capital surplus of $31.0 million (December 31, 2019: $3.2 million).

Full Report

Source: Castor Maritime Inc.

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