Euroseas Ltd. Reports Increase of 85% in First Quarter Net Revenues, but Warns of Challenging Market Environment for the Rest of 2020
Euroseas Ltd., an owner and operator of container carrier vessels and provider of seaborne transportation for containerized cargoes, announced today its results for the three-month period ended March 31, 2020.
First Quarter 2020 Financial Highlights:
• Total net revenues of $15.4 million. Net income of $2.0 million; net income attributable to common shareholders (after a $0.2 million of dividend on Series B Preferred Shares) of $1.8 million or $0.32 per share basic and diluted. Adjusted net income attributable to common shareholders¹ for the period was $1.0 million or $0.17 per share basic and diluted.
• Adjusted EBITDA¹ was $4.1 million.
• An average of 19.0 vessels were owned and operated during the first quarter of 2020 earning an average time charter equivalent rate of $9,615 per day.
• Finally, the Company declared its fifth cash dividend of $0.2 million on its Series B Preferred Shares.
Aristides Pittas, Chairman and CEO of Euroseas commented: “During the first quarter of 2020, containership markets were affected by the COVID-19 pandemic and declined throughout the quarter. The decline continued during April and May 2020 as regions which typically drive containerized trade, like Europe and North America, locked down their economies to control the spread of the pandemic, negatively affecting trade growth. Indeed, it is expected that 2020 will register a significant shrinkage of containerized trade although some recovery should start taking place by the fourth quarter as the world economy is gradually exiting from the lock down.”
“Within this very challenging environment, almost all of our vessels have remained employed at profitable rates during the first quarter except for Manolis P and EM Oinousses which are in the process of being scrapped and, since early May 2020, EM Spetses which is searching for employment.”
“Looking forward, we believe that there will remain a challenging market environment in 2020 with our contract renewals expected to be at lower charter rate levels; but a supply-demand balance favoring demand should develop in 2021 not only due to containerized trade and demand for vessels strongly rebounding but also due to limited supply growth as a result of one of the lowest orderbooks in the last 20 years. There are still significant uncertainties remaining regarding the timing and strength of recovery after the pandemic and risks related to a potential revival of the trade tensions between US and China.”
“On the investment front, our strategy remains to take advantage of our status as the only publicly listed feeder and intermediate-size containership company and use it as a means of consolidation of other vessels or fleets as we have done in the second half of 2019.”
Tasos Aslidis, Chief Financial Officer of Euroseas commented: “The results of the first quarter of 2020 reflect the better charter rates our vessels earned compared to the market because of their existing charter contracts not yet fully affected by the results of the COVID-19 pandemic. Our net revenues increased significantly as we operated on average 19.0 vessels during the first quarter of 2020 versus 11.0 vessels during the same period of last year.”
“On a per-vessel-per-day basis, our vessels earned a higher average charter rate in the first quarter of 2020 as compared to the same period of 2019, as a result of their existing charters, and different composition of the fleet which now contains larger and younger vessels on average. Again, on a per-vessel-per-day basis, the sum of vessel operating expenses, management fees and general and administrative expenses decreased by 5.5% during the first quarter of 2020 as compared to the same period in 2019 which was primarily attributable to the different mix and allocation of general administrative expenses to a greater number of vessels we had in 2020. We believe that we continue to maintain one of the lowest operating cost structures amongst the public shipping companies which is one of our competitive advantages.”
“Adjusted EBITDA during the first quarter of 2020 was $4.1 million compared to $1.5 million achieved for the first quarter of 2019.”
“Finally, as of March 31, 2020, our outstanding debt (excluding the unamortized loan fees) is about $86.9 million versus restricted and unrestricted cash of about $5.5 million.”
First Quarter 2020 Results:
For the first quarter of 2020, the Company reported total net revenues of $15.4 million representing an 85.1% increase over total net revenues of $8.3 million during the first quarter of 2019. On average, 19.0 vessels were owned and operated during the first quarter of 2020 earning an average time charter equivalent rate of $9,615 per day compared to 11.0 vessels in the same period of 2019 earning on average $9,088 per day. The Company reported a net income for the period of $2.0 million and a net income attributable to common shareholders of $1.8 million, as compared to a net loss of $0.02 million and a net loss attributable to common shareholders of $0.49 million respectively for the first quarter of 2019. The results for the first quarter of 2020 include $0.8 million of amortization of below market charters acquired.
Vessel operating expenses for the first quarter of 2020 amounted to $8.0 million as compared to $4.8 million for the same period of 2019. The increased amount is due to the higher number of vessels owned and operated in the first quarter of 2020 compared to the corresponding period of 2019. Depreciation expense for the first quarter of 2020 amounts to $1.7 million compared to $0.8 million for the same period of 2019 due to the increased number of vessels in the Company’s fleet. In the first quarter of 2020, none of our vessels underwent drydocking. In the same period of 2019, one vessel completed its special survey with a cost of $0.7 million.
Interest and other financing costs for the first quarter of 2020 amounted to $1.3 million compared to $0.7 million for the same period of 2019. This increase is due to the increased amount of debt in the current period compared to the same period of 2019, partly offset by the decreased Libor rates of our bank loans during the period as compared to the same period of last year.
Adjusted EBITDA1 for the first quarter of 2020 was $4.1 million, compared to $1.5 million achieved for the first quarter of 2019. Please see below for Adjusted EBITDA reconciliation to net (loss) / income.
Basic and diluted earnings per share for the first quarter of 2020 was $0.32, calculated on 5,576,960 basic and diluted weighted average number of shares outstanding compared to basic and diluted loss per share of $0.32 for the first quarter of 2019, calculated on 1,542,508 basic and diluted weighted average number of shares outstanding.
Excluding the effect on the income attributable to common shareholders for the quarter of the unrealized gain on derivatives and the amortization of the below market time charters acquired, the adjusted earnings per share for the quarter ended March 31, 2020 would have been $0.17 per share compared to adjusted loss of $0.33 per share basic and diluted for the first quarter of 2019. Usually, security analysts do not include the above items in their published estimates of earnings per share.
Source: Euroseas Ltd.