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EuroDry Ltd. Says Dry Bulk Rates Remain Profitable, Despite Recent Drop

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 nine-month periods ended September 30, 2022.

Third Quarter 2022 Highlights:

Total net revenues for the quarter of $15.8 million.

Net income attributable to common shareholders of $6.2 million or $2.11 and $2.10 earnings per share basic and diluted, respectively.

Adjusted net income attributable to common shareholders1 for the quarter of $5.7 million, or, $1.94 and $1.93 per share basic and diluted, respectively.

Adjusted EBITDA1 was $9.5 million.

An average of 11.0 vessels were owned and operated during the third quarter of 2022 earning an average time charter equivalent rate of $20,637 per day.

On September 19, 2022 we announced the sale of M/V Pantelis, a 74,020 dwt drybulk vessel, built in 2000, for approximately $9.7 million. The vessel was delivered to her new owners, an unaffiliated party, on October 17, 2022.

As of November 9, 2022 we had repurchased 108,963 shares of our common stock in the open market for $1.5 million, under our share repurchase plan of up to $10 million, announced in August 2022.

Nine Months 2022 Highlights:

Total net revenues of $55.1 million.

Net income attributable to common shareholders was $27.3 million, or $9.43 and $9.34 earnings per share basic and diluted, respectively.

Adjusted net income attributable to common shareholders1 for the period was $25.1 million or $8.69 and $8.60 adjusted earnings per share basic and diluted, respectively, before unrealized gain on derivatives.

Adjusted EBITDA1 was $35.9 million.

An average of 10.5 vessels were owned and operated during the first nine months of 2022 earning an average time charter equivalent rate of $22,876 per day.

Aristides Pittas, Chairman and CEO of EuroDry commented: “During the third quarter of 2022, average time charter rates for the sizes of vessels we own dropped on average by 35-50% compared to the second quarter of 2022 with Supramax and Ultramax spot earnings dropping a bit less. Since the end of the third quarter, time charter rates slid down by another 5% to 12%, while average spot earnings improved. We believe that these developments were the result of, first, lower shipping demand due to the economic slowdown across the globe because of energy supply uncertainty from the Ukraine-Russia war and the increasing interest rates to combat rising inflation, and secondly, receding port-related delays which increased vessel availability and put downward pressure on rates.

“Despite the rate drop, rates remain at profitable levels and, certainly, above the average rate level observed during the decade before the COVID pandemic started. While the economic uncertainty might continue over the next six months or so, the underlying market fundamentals will be dominated by the historically low level of drybulk orderbook which should result in tight vessel supply conditions over the next two to three years providing support to the charter rates. Additionally, the implementation of the greenhouse gas emission regulations starting in 2023 is expected to further reduce the effective supply of vessels contributing to the tightness of the market.

“Thus, we remain optimistic about the prospects of the market. We believe we are well positioned to exploit opportunities to expand and renew our fleet utilizing the liquidity we have built over the last two years including proceeds from selected sales of vessels like the sale of our 22-year old vessel M/V Pantelis. At the same time we intend to continue our share repurchase program announced last August which not only represents an attractive investment opportunity but also enhances the value of our stock and benefits all our shareholders.”

Tasos Aslidis, Chief Financial Officer of EuroDry commented: “Comparing our results for the third quarter of 2022 with the same period of 2021, our net revenues decreased by about $3.6 million, due to the lower time charter equivalent rates our vessels earned as compared to the third quarter of 2021 and the increased scheduled off-hire days for the third quarter of 2022, when our vessels did not earn revenues, compared to the same period of 2021. Operating expenses, including management fees and general and administrative expenses increased from $6,495 per vessel per day in the third quarter of 2021 to $6,593 in the third quarter of 2022. This increase is mainly due to the higher prices paid for the supply of lubricants, spare parts and stores for our vessels compared to the same period of 2021, as a result of the war in Ukraine.

Adjusted EBITDA during the third quarter of 2022 was $9.5 million compared to $13.0 million achieved for the third quarter of last year. As of September 30, 2022, our outstanding debt (excluding the unamortized loan fees) was $88.0 million while unrestricted and restricted cash was $32.4 million. As of the same date, our scheduled debt repayments including balloon payments over the next 12 months amounted to about $26.8 million (excluding the unamortized loan fees) and all our loan covenants are satisfied.”

Third Quarter 2022 Results:

For the third quarter of 2022, the Company reported total net revenues of $15.8 million representing a 18.7% decrease over total net revenues of $19.5 million during the third quarter of 2021 which was primarily the result of the lower time charter rates our vessels earned in the third quarter of 2022 compared to the corresponding period of 2021 and the increased scheduled off-hire days of the third quarter of 2022, when our vessels did not earn revenues. The Company reported a net income and net income attributable to common shareholders for the period of $6.2 million, as compared to a net income of $12.1 million and a net income attributable to common shareholders of $11.8 million for the same period of 2021.

For the third quarter of 2022, a gain on bunkers resulted in positive voyage expenses, of $2.0 million, as compared to positive voyage expenses of $0.1 million for the same period of 2021. Vessel operating expenses were $5.2 million for the third quarter of 2022 as compared to $3.7 million for the same period of 2021. The increase is attributable to the increased number of vessels operating in the third quarter of 2022 compared to the corresponding period in 2021, as well as the higher prices paid for the supply of lubricants, spare parts and stores for our vessels compared to the same period of 2021, as a result of the war in Ukraine. Depreciation expense for the third quarter of 2022 amounted to $2.9 million, as compared to $2.0 million for the same period of 2021. This increase is due to the higher number of vessels operating in the third quarter of 2022 as compared to the same period of 2021. General and administrative expenses increased to $0.7 million in the third quarter of 2022, as compared to $0.6 million in the third quarter of 2021. This increase is mainly attributable to the increased cost of our stock incentive plan. During the third quarter of 2022, two of our vessels completed their special survey with drydocking and one of our vessels was drydocked within the quarter in order to pass her special survey, which was completed in the fourth quarter of 2022. The total drydocking cost for the quarter was $2.7 million, while there were no vessels undergoing drydocking during the third quarter of 2021.

Interest and other financing costs for the third quarter of 2022 amounted to $1.0 million compared to $0.6 million for the same period of 2021. Interest expense during the third quarter of 2022 was higher mainly due to the increased amount of debt and the increased Libor rates of our loans during the period as compared to the same period of last year. For the three months ended September 30, 2021, 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, as compared to a marginal loss on three interest rate swap contracts and a $0.1 million loss on FFA contracts, comprising an unrealized gain of $1.6 million and a realized loss of $1.7 million during the third quarter of 2021.

On average, 11.0 vessels were owned and operated during the third quarter of 2022 earning an average time charter equivalent rate of $20,637 per day compared to 8.1 vessels in the same period of 2021 earning on average $28,103 per day.

Adjusted EBITDA for the third quarter of 2022 was $9.5 million compared to $13.0 million achieved during the third quarter of 2021.

Basic and diluted earnings per share attributable to common shareholders for the third quarter of 2022 were $2.11 basic and $2.10 diluted calculated on 2,925,799 basic and 2,930,909 diluted weighted average number of shares outstanding, compared to $4.47 basic and $4,41 diluted calculated on 2,634,822 basic and 2,675,224 diluted weighted average number of shares outstanding for the third quarter of 2021.

Excluding the effect on the earnings attributable to common shareholders for the quarter of the unrealized gain derivatives, the adjusted earnings attributable to common shareholders for the quarter ended September 30, 2022 would have been $1.94 and $1.93 per share basic and diluted, respectively, compared to adjusted earnings of $3.84 and $3.79 per share basic and diluted, respectively, for the quarter ended September 30, 2021. Usually, security analysts do not include the above item in their published estimates of earnings per share.

First Nine Months 2022 Results:

For the first nine months of 2022, the Company reported total net revenues of $55.1 million representing a 30.7% increase over total net revenues of $42.1 million during the first nine months of 2021, which was mainly the result of the increased number of vessels operated and the slightly higher time charter rates our vessels earned during the period of 2022 compared to the same period of 2021. The Company reported a net income and net income attributable to common shareholders for the period of $27.3 million, as compared to a net income of $15.1 million and a net income attributable to common shareholders of $14.2 million, for the nine-month period of 2021.

For the nine months of 2022, a gain on bunkers resulted in positive voyage expenses of $2.9 million, as compared to positive voyage expenses of $0.5 million in the same period of 2021. Vessel operating expenses were $14.4 million for the nine months of 2022 as compared to $9.9 million for the same period of 2021. The increase is attributable to the increased number of vessels operating in the first nine months of 2022 compared to the corresponding period in 2021, as well as the higher prices paid for the supply of lubricants, spare parts and stores for our vessels compared to the same period of 2021, as a result of the war in Ukraine. Depreciation expense for the first nine months of 2022 were $8.2 million compared to $5.4 million during the same period of 2021, mainly due to the higher number of vessels operating in the same period. On average, 10.5 vessels were owned and operated during the first nine months of 2022 earning an average time charter equivalent rate of $22,876 per day compared to 7.5 vessels in the same period of 2021 earning on average $22,232 per day. General and administrative expenses increased to $2.1 million during the first nine months of 2022 as compared to $1.7 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 2022, four vessels underwent special survey, one vessel passed her intermediate survey in water (in lieu of drydock) and one of our vessels was drydocked within the quarter in order to pass her special survey, which was completed in the fourth quarter of 2022. The total drydocking cost for the period was $4.4 million, while there were no vessels undergoing drydocking during the first nine months of 2021.

Interest and other financing costs for the first nine months of 2022 amounted to $2.4 million compared to $1.7 million for the same period of 2021. Interest expense during for the period was higher due to the increased amount of debt and the increased Libor rates of our loans during the period as compared to the same period of last year. 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 as compared to a $0.1 million gain on three interest rate swaps and a $2.5 million unrealized loss and $3.0 million realized loss on FFA contracts.

Adjusted EBITDA for the nine months of 2022 was $35.9 million compared to $26.3 million achieved during the first nine months of 2021.

Basic and diluted earnings per share attributable to common shareholders for the first nine months of 2022 was $9.43, calculated on 2,890,771 basic and $9.34, calculated on 2,918,800 diluted weighted average number of shares outstanding, compared to basic and diluted earnings per share attributable to common shareholders of $5.84, calculated on 2,427,810 basic and $5.74, calculated on 2,470,726 diluted weighted average number of shares outstanding, for the same period of 2021.

Excluding the effect of the change in the fair value of derivatives on the earnings attributable to common shareholders for the first nine months of the year, the adjusted earnings attributable to common shareholders for the nine-month period ended September 30, 2022 would have been $8.69 and $8.60 per share basic and diluted, respectively, compared to adjusted earnings per share of $7.42 basic and $7.29 diluted for the same period in 2021. As previously mentioned, usually, security analysts do not include the above item in their published estimates of earnings per share.
Source: EuroDry Ltd.

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