EuroDry Ltd.: Lowest Dry Bulk Orderbook in Almost 20 Years, Bodes Well for Sector’s Long-Term Prospects
EuroDry Ltd., an owner and operator of drybulk vessels and provider of seaborne transportation for drybulk cargoes, announced today its results for the three and six month period ended June 30, 2018. Euroseas Ltd. (“Euroseas” or “Former Parent Company”) contributed to the Company its drybulk fleet of six vessels, one Ultramax and two Kamsarmax vessels built between 2016 and 2018, and three Japanese-built Panamax vessels built between 2000 and 2004 (the “Spin-off”). The Company was spun-off from Euroseas Ltd. on May 30, 2018. The results below refer to the above fleet for the periods presented. Historical comparative periods reflect the results of the carve-out operations of the six vessels that were contributed to the Company.
Second Quarter 2018Highlights:
- Total net revenues of $6.1 million. Net income of $0.5 million; net earnings attributable to common shareholders (after a $0.08 million dividend on Series B Preferred Shares) of $0.4 million or $0.17 earnings per share basic and diluted. Adjusted net income attributable to common shareholders1for the period was $0.4 million or $0.16 per share basic and diluted.
- Adjusted EBITDAwas $2.4 million.
- An average of 5.6 vessels were owned and operated during the second quarter of 2018earning an average time charter equivalent rate of $12,069 per day.
- The Company declared its first dividend of $0.08 million on its Series B Preferred Shares; the dividend was paid in-kind by issuing additional Series B Preferred Shares. On May 30, 2018 Euroseas distributed shares of our Series B Preferred Stock (the “EuroDry Series B Preferred Shares”) to holders of Euroseas’ Series B Preferred Shares, representing 50% of Euroseas Series B Preferred Stock. The dividend was for the period from the date of the Spin-off to June 30, 2018.
Adjusted EBITDA, Adjusted net income/(loss) and Adjusted income/(loss) per share are not recognized measurements under US GAAP (GAAP) and should not be used in isolation or as a substitute for Eurodry’s 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.
Aristides Pittas, Chairman and CEO of EuroDry commented: “During the second quarter of 2018, we achieved a significant milestone in executing our strategy by completing the spin-off of EuroDry Ltd, a shipping company focused on high quality middle range drybulk vessels. Three of these vessels were built by Euroseas Ltd. and fully equipped with eco features, while the remaining three vessels are high quality middle-age Panamaxes built in Japan, the workhorses of the drybulk trade. We are pleased to note that our shareholders benefited from the spin-off by having the market value of their combined EuroDry and Euroseas holdings increase by more than 40% as a result of the spin-off. Still, Eurodry is trading at a more than 50% discount to NAV, something we believe will be corrected as the market comes to understand the value of this new pure bulk carrier play and compares it with its peers.
“We are optimistic about the prospects of the drybulk markets as the orderboook is close to its lowest levels of the last 20 years and new regulations coming in effect in the near future will likely keep the supply of vessels in check; this will allow increases in demand to positively influence earnings and values. We believe it is still an opportune time to pursue growth either through individual vessel purchases or by consolidating with others who would like to become shareholders of a publicly listed drybulk company. Along those lines, we have been evaluating opportunities to acquire new vessels and exploring merger possibilities with other fleets in accretive transactions. We expect that the profitability we are experiencing in Q2 will continue and even further improve in the next couple of quarters.”
Tasos Aslidis, Chief Financial Officer of EuroDry commented: “The results of the second quarter of 2018 reflect the improving levels of the drybulk markets compared to the same period of 2017.
“Total daily vessel operating expenses, including management fees, general and administrative expenses but excluding drydocking costs, averaged $6,726 per vessel per day during the second quarter of 2018 as compared to $5,626 per vessel per day for the same quarter of last year, and $6,701 per vessel per day for the first half of 2018 as compared to $5,453 per vessel per day for the same period of 2017. This increase is mainly due to higher general and administrative expenses as a result of the cost of the Spin-off of EuroDry.
“Adjusted EBITDA during the second quarter of 2018 was $2.4 million versus $1.4 million in the second quarter of last year. As of June 30, 2018, our outstanding debt (excluding the unamortized loan fees) was $53.7 million versus restricted cash, unrestricted cash and amounts due from related companies of $9.7 million. As of the same date, our scheduled debt repayments over the next 12 months amounted to about $16.5 million (excluding the unamortized loan fees) and all our loan covenants are satisfied.”
Second Quarter 2018 Results:
For the second quarter of 2018, the Company reported total net revenues of $6.1 million representing a 29.1% increase over total net revenues of $4.7 million during the second quarter of 2017 which was the result of the increased average number of vessels and the increase in the average time charter equivalent rate our vessels earned due to increase in dry bulk market rates. The Company reported net income for the period of $0.5 million and net income attributable to common shareholders of $0.4 million, as compared to a net loss and a net loss attributable to common shareholders of $0.3 million for the same period of 2017. The results for the second quarter of 2018 include a $0.02 million of unrealized gain on an interest rate swap contract which was entered into during the third quarter of 2017. Depreciation expenses for the second quarter of 2018 amounted to $1.3 million compared to $1.2 million for the same period of 2017. Increased general and administrative expenses reflect mainly expenses related to the Spin-off.
Interest and other financing costs for the second quarter of 2018 amounted to $0.62 million compared to $0.50 million for the same period of 2017. Interest during the second quarter of 2018 was higher due to higher debt and higher Libor during the period as compared to the same period of last year.
On average, 5.6 vessels were owned and operated during the second quarter of 2018 earning an average time charter equivalent rate of $12,069 per day compared to 5.0 vessels in the same period of 2017 earning on average $9,429 per day.
Adjusted EBITDA for the second quarter of 2018 was $2.4 million compared to $1.4 million achieved during the second quarter of 2017.
Basic and diluted earnings per share attributable to common shareholders for the second quarter of 2018 was $0.17 calculated on 2,226,753 basic and diluted weighted average number of shares outstanding, compared to basic and diluted loss per share of $0.13 for the second quarter of 2017, calculated on 2,212,322 basic and diluted weighted average number of shares outstanding.
Excluding the effect on the earnings attributable to common shareholders for the quarter of the unrealized gain on derivative, the adjusted net earnings attributable to common shareholders for the quarter ended June 30, 2018 would have been $0.16 per share basic and diluted compared to adjusted net loss of $0.13 per share basic and diluted for the quarter ended June 30, 2017. Usually, security analysts do not include the above items in their published estimates of earnings per share.