EuroDry Ltd (EDRY) 2025 Q2 法說會逐字稿

Thank you for standing by, ladies and gentlemen, and welcome to the EuroDry Limited conference call for the second-quarter 2025 financial results. We have today here with us Mr. Aristides Pittas, Chairman and Chief Executive Officer; and Mr. Tasos Aslidis, Chief Executive Officer. (Operator Instructions)

I must advise you that this conference is being recorded today. Please be reminded that the company announced its results with a press release that has been publicly distributed.

Before passing the floor over to Mr. Pittas, I would like to remind everybody that in today's presentation and conference call, EuroDry will be making forward-looking statements. These statements are within the meaning of the federal securities laws. Matters discussed may be forward-looking statements, which are based on current management expectations that involve risks and uncertainties that may result in such expectations not being realized.

I kindly draw your attention to slide number 2 on the webcast presentation, which has the full forward-looking statement. The same statement was also included in the press release. Please take a moment to go through the whole statement and read it.

I would now like to turn the floor over to Mr. Pittas. Please go ahead, sir.

Good morning, ladies and gentlemen, and thank you all for joining us today for our scheduled conference call. Together with me is Mr. Tasos Aslidis, our Chief Financial Officer. The purpose of today's call is to discuss our financial results for the 3 and 6-month period ended June 30, 2025.

Please turn to slide 3 of the presentation. Our financial highlights are shown here. For the second quarter of 2025, we reported total net revenues of $11.3 million and the net loss attributable to controlling shareholders of $3.1 million or $0.12 loss per basic and diluted share. Adjusted net loss attributable to controlling shareholders for the quarter was $3 million or $1.1 loss per basic and diluted share.

Adjusted EBITDA for the quarter was $1.9 million. Please refer to the press release for the reconciliation of adjusted net loss and adjusted EBITDA. Also, our CFO, Tasos Aslidis, will go over our financial highlights in more detail later on in the presentation.

As of today, we have repurchased 334,000 shares of our common stock in the open market for a total of $5.3 million under our $10 million share repurchase plan announced in August 2022. Our Board of Directors has approved an extension of the program for an additional year. We intend to continue executing repurchases up to the originally approved amount of $10 million at a disciplined rate, taking into account the company's liquidity needs and relatively small free float.

We are also pleased to announce that tomorrow, our 2024 environmental, social, and governance report will become available on our website. This is the fifth year we are providing such report. The report outlines our ongoing initiatives and progress across all key ESG pillars, reflecting our continued commitment to sustainable and responsible operations. Please turn to slide 4 to view our recent developments.

On the chartering front, all our recent fixtures have been either short-term or on index-linked charters. While the Houthi attacks on dry bulk carriers in the Red Sea in July offered an upbeat in charter rates due to the routing of vessels, early August has proven that the seasonality remains. We are hoping for a better fall. In the current rate environment, we have chosen not to commit our vessels on longer-term contracts until market conditions improve, prioritizing operational flexibility. Should rates return to profitable and cash flow accretive levels, we will endeavor to fix a portion of our fleet on longer term. The specifics of the charters fixed during the period are outlined in the accompanying presentation.

Moving on to our operational highlights, Santa Cruz underwent scheduled dry docking and repairs over a period of approximately 35 days, the biggest part of those spanning in Q3 though. There was no idle time or commercial off-hire for our fleet during the period.

Please turn to slide 5. EuroDry's current fleet consists of 12 vessels with an average age of approximately 13.6 years and a total carrying capacity of about 843,000 deadweight tons. In addition, we have 2 Ultramax vessels under construction, each with a capacity of 63,500 deadweight tons, scheduled for delivery in the second and third quarters of 2027.

Upon delivery, our fleet will grow to 14 vessels with a total carrying capacity of nearly 1 million deadweight tons. I'd like to remind you that EuroDry owns 61% of the entities that own motor vessels, Christos K and Maria, and the remaining 39% is owned by owners represented by NRP Project Finance, otherwise referred to as the NRP investors.

Please turn to Slide 6 for a further update of our fleet employment. As of June 30, 2025, our fixed rate coverage for the remainder of the year stands at approximately 25% based on existing time charter agreements. This figure excludes vessels operating under index-linked charters, which, while subject to market fluctuations, have secured employment. We currently have four vessels on index-linked charters with duration ranging from October 25 to May 2026. These charters can be practically changed to fixed rate with the use of FFA if rates improve to the levels we aspire.

Turning to slide 8, we will go over the market highlights for the second quarter ended June 30, 2025, up until recently. Panamax spot rates rose steadily through the second quarter of 2025, increasing from an average of about $10,300 per day to $11,900 per day by quarter end, a 15% gain. As of August 1, spot rates stand at $13,750 a day, surpassing the respective time charter average levels of $12,600 per day as a result of the Houthi attacks and the subsequent rerouting effect from the area.

However, if one goes back only a couple of weeks prior to that, both spot and average time charter rates were even higher than that at $16,000 per day and $13,250 per day, respectively, suggesting that the usual summer lull is here. We hope to see seasonality displaying itself and resulting in a firmer market towards the end of the third quarter, though admittedly, visibility remains limited amid persistent macro and geopolitical headwinds.

In the second quarter of 2025, the Baltic Dry Index and the Baltic Panamax Index declined by approximately 21% and 28%, respectively, year-over-year, underscoring the sustained softness across the freight market. These downward shifts reflect the ongoing imbalance between vessel supply and muted cargo demand, exaggerated by subdued global trade volumes and persistent macroeconomic headwinds. Please now turn to Slide 9.

The IMF July 2025 update presents a more resilient global economic outlook than previously thought, with global trade developments continuing to shape the forecast. The global economy continues to exhibit stable yet underwhelming growth. Global GDP growth is now projected at 3% for 2025 and 3.1% for 2026, with the 2025 and 2026 projections revised upwards by 0.2 and 0.1 percentage points, respectively, compared to the April 2025 forecast. At these levels, the forecasts are below the 2024 outcome of 3.3% and the pre-pandemic historical average of 3.7% Global policy remains highly uncertain. Trans new tariffs took effect on Thursday, August 7, with higher rates for most US trading partners. Taken altogether, these tariffs have pushed the average US tariff rate to above 15% according to Bloomberg Economic estimates, well above the 2.3% last year, and this is the highest level since World War II.

The United States economy is projected to grow by 1.9% in 2025 and accelerate slightly to 2% in 2026, according to the IMF. US growth forecasts were revised upwards due to easing trade tensions, improved financial conditions, the weaker dollar, and recent tax incentives aimed at stimulating business investment and consumer spending. The higher projections, including the global figures overall, reflect a large front-loading of international trade ahead of expected higher prices induced by tariffs.

In Europe, GDP accelerated, driven by investment and net exports. Growth in the area is now projected at 1% for 2025, up 0.2% points from April's projections. Global inflation is expected to continue declining, with headline inflation projected at 4.2% in 2025 and 3.6% in 2026. In the euro area, inflation has gone down quite substantially, whilst in the US, the unemployment rate remains low and inflation is still elevated.

Emerging markets remain the primary drivers of global growth. India is forecast to expand by 6.4% in both 2025 and 2026, fueled by strong investment, robust agriculture, and a dynamic services sector. The 5 countries are also projected to post healthy gains. In China, growth has been revised upwards, driven by stronger-than-expected economic performance in the first half of the year and lower-than-anticipated tariffs between the US and China and the positive impact of fiscal stimulus reforms aimed at clearing local government as, which all have boosted domestic demand.

Turning to the dry bulk sector, Clarkson's Research now projects a slightly positive trade growth of 0.2% in 2025, an upward revision from the previously forecasted 0.4% decline. This is followed by 0.6% growth in 2026, up from 0.4% projected in April. While expectations remain modest, these adjustments reflect a gradual improvement in market sentiment and a more constructive outlook for trade flows.

Please turn to slide 10 to review the current state of the order book in the dry bulk sector. As you can see, as of August 1, the order book is at 11% of the fleet, though higher than the 7% low seen in 2021, the order book still remains among the lowest levels in history. Whilst the order book is slightly rising, increased slow steaming, higher scrapping rates, and intensity of environmental regulations could further constrain the available bulker fleet.

Turning to slide 11, let us now look into the supply fundamentals in a little bit more detail. As of August 2025, the total dry bulk operating fleet was 14,151 vessels. According to Clarkson's latest report, new deliveries as a percentage of total fleet are expected to be 3.8% in 2025, 3.9% in 2026, and 4.9% in 2027 onwards. The actual fleet growth is, of course, expected to be lower than the aforementioned figures due to scrapping and some slippage.

On the fleet profile, it's noticeable that about 10% of the fleet is older than 20 years old, indicating these vessels will likely be scrapped if the dry bulk sector continues operating in this suppressed environment.

Please turn to slide 12, where we summarize our outlook for the dry bulk market. The bulk carrier market has been relatively weak so far in 2025, with time charter rates bottoming out in the first quarter before recovering to slightly profitable levels across all vessel sizes. However, the momentum gained early in the year faded in the second quarter following the US administration's announcement of new tariff proposals. This has added to an already uncertain demand environment with slowing activity in key markets and ongoing geopolitical instability continuing to put pressure on the sector.

After the recent uptick, average charter rates for Ultramax and Kamsarmax vessels are currently down only about 3% year-on-year. However, on the average of the whole of H1 of 2025, we are down about 3% relative to 2024 first half. For the remainder of 2025, bulk carrier demand and supply projections point to a softer market compared to 2024. In China, dry bulk imports are not expected to replicate the robust growth seen in 2023 and 2024, especially as far as coal is concerned.

While the recent government stimulus measures have improved, they are unlikely to drive significant structural demand growth, particularly given the high stockpile levels. In the United States, trade policy is now a central focus for dry bulk markets until the new -- under the new Trump administration tariffs on China, Mexico, Canada, and other key trade partners present to disrupt grain and minor bulk trades. Meanwhile, shipping through the Red Sea is not expected to resume immediately. However, any reduction in disruptions could dampen demand growth and contribute to further easing in bulk carrier markets. So on the supply side, ordering of new vessels has remained relatively limited, constrained by the lack of available shipyard slots and continued uncertainty over the optimum fuel of the future, despite significant orders for methanol and LNG fuel ships.

While the overall order book to fleet ratio remains low by historical standards at 11%, the order book for Panamax vessels has been trending higher, reaching approximately 14%. For Handymax vessels, this ratio is about 11.5%. As we head into 2026, the bulk carrier market may face another year of soft earnings as new vessel supply is expected to outpace demand growth, which as discussed previously, Clarkson's currently estimated about 0.6%. Continued market softness, though, could prompt further supply-side adjustments, including slower vessel operating speed and increased demolition activity, which could both help the market rebalance.

Let's turn to slide 13. As of August 1, the 1-year time charter rate for Panamax vessels with a capacity of 75,000 deadweight tons stands at approximately $12,700 per day, which remains slightly below the historical median of $13,500 per day. As of the second quarter of 2025, the market for 10-year-old Panamax bulk carriers, despite a 10% to 15% correction, remains relatively firm, with current asset values estimated at close to $25 million. This is significantly above both the historical median of $15.5 million and the 10-year average of $17.5 million, reflecting residual strength in secondhand values. However, current pricing marks a clear decline from the mid-2024 peak of around $29.5 million, which is also the maximum price seen in the last 10 years.

Despite the pullback, asset prices remain well supported by the historically low order book levels, the increased cost of construction of ships, and the fleet age dynamics. We are closely monitoring all the new developments, which will shape the near and longer-term future. At current price levels, we are more likely to be selling a couple of our older vessels whilst looking for the right opportunity to renew our fleet with more modern and eco-friendly vessels.

Let me now pass the floor over to our CFO, Tasos Aslidis, to go over our financial highlights in more detail.

Thank you very much, Aristides. Good morning from me as well, ladies and gentlemen. As usual, over the next four slides, I will give you an overview of our financial highlights for the second quarter and first half of 2025 and compare those results to the same period of last year. For that, let's go to slide 15.

For the second quarter of 2025, we reported total net revenues of $11.3 million, representing a 35.3% decrease over total net revenues of $17.4 million that we achieved during the second quarter of last year. This decrease was the result of the lower time charter rates our vessels earned, as well as a decreased average number of vessels operated during the second quarter of this year compared to last year. We reported a net loss for the period of $3.1 million and a net loss attributable to controlling shareholders of $3.07 million as compared to a net loss of $0.3 million and net loss attributable to controlling shareholders of $0.4 million for the same period of 2024. The net loss of $0.4 million in this quarter, attributable to the noncontrolling interest, represents the loss attributable to the 39% ownership of the entities of the vessels, Christos K and Maria, which are partly owned by the NRP investors as mentioned earlier.

Interest and other financing costs for the second quarter of 2025 amounted to $1.7 million compared to $2 million over the same period of 2024, both figures including a small amount of interest income. Interest expense for the second quarter of 2025 was lower, mainly due to the decreased SOFR rates and margins on average at our loan state, partly offset by the increased average debt that we carried during the second quarter of 2025 as compared to the same period of last year.

Adjusted EBITDA for the second quarter of this year was $1.9 million compared to $5 million achieved during the second quarter of 2024. Basic and diluted loss per share attributable to the controlling shareholders for the second quarter of 2025 was $1.12 calculated on about $2.7 million basic diluted weighted average number of shares outstanding compared to a loss per share of $0.15 calculated on $2.7 million based on the diluted weighted average number of shares outstanding for the second quarter of last year.

Excluding the effect on the loss attributable to the controlling shareholders for the quarter of the unrealized gain on derivatives, the adjusted loss for the quarter ended June 30, 2025, would have been $1.10 per share basic and diluted compared to an adjusted loss of $0.17 per share basic diluted for the previous -- for the quarter of the previous year.

Let's now look at the numbers on the same slide and look at the numbers for the corresponding 6-month period ended June 30, 2025, and compared to the same period of 2024. So for the first half of this year, we reported total net revenues of $20.5 million representing a 35.7% decrease over total net revenues of $31.9 million during the first half of 2024, which is again the result of the lower time charter rate of vessels earned and to some extent, the decreased average number of vessels operated during the first half of this year compared to last year.

Net loss for the period was $7.11 million, and net loss attributable to the controlling shareholders was $6.7 million, as compared to a net loss of $2.24 net loss attributable to controlling shareholders of $2.19 million for the same period of 2024. Again, a portion of the net loss for the second quarter of this year, $0.34 million, represents a loss that corresponds to the 35% ownership of the entities owning Christos K and Maria, which are owned by the NRP investors.

Interest and other financing costs for the first half of 2025 amounted to $3.5 million compared to $4 million for the same period of 2024. Again, this decrease is due to the lower benchmark rates of rates that our loans paid, partly offset by the higher levels of debt that we carried on average during the period. Adjusted EBITDA for the first half of 2025 was $0.9 million compared to $7.1 million during the first half of 2024. Basic and diluted loss per share attributable to the controlling shareholders for the first half of 2025 was $2.47, calculated on $2.7 million approximately, basic and diluted weighted average number of shares outstanding, compared to a loss of $0.81 for the same period of last year.

Again, here, excluding the effect on the net loss attributable to the controlling shareholders for the first half of the year of the unrealized gain or loss on derivatives and the gain on the sale of a vessel, the adjusted loss for the 6-month period ended June 30, 2025, would have been $3.17 per share basic diluted compared to adjusted loss of $1.35 per share basic diluted for the 6 months -- for the first 6 months of 2024.

Let's now move to slide 16 to review our fleet performance. We will start our review by looking at our fleet utilization rate for the second quarter of 2025 and 2024. As usual, our fleet utilization is broken down into commercial and operational components. During the second quarter of 2025, our commercial utilization fleet was 100%, while our operational utilization rate was 99.3% compared to 99.6% commercial and 99.4% operational for the second quarter of 2024. On average, 12 vessels were owned and operated during the second quarter of 2025, earning an average time charter equivalent rate of $1,420 per vessel per day compared to 13 vessels that we operated during the same period of last year, earning an average of $14,427 per day.

Our total daily operating expenses, including management fees, G&A expenses but excluding drydocking costs, were $7,539 per vessel per day during the second quarter of this year, compared to $7,062 per vessel per day for the second quarter of 2024. If we move further down on this table, we can see the cash flow breakeven levels, which takes into account, in addition to the above expenses, the drydocking expenses, interest expenses, and also includes loan repayments. Thus, for the second quarter of 2025, our daily cash flow breakeven level was $12,220 per vessel per day compared to $13,240 per vessel per day for the second quarter of last year.

Let's now quickly move to the right part of this table and go over the same figures for the 6-month period of this year compared to the last. So first on the utilization rate for the first half of 2025, both our commercial utilization rates were each 99.2% compared to 99.8% commercial and 98.7% operational for the same period of last year. On average, we operated 12.4 vessels, earning an average time charter equivalent rate of $8,716 per day compared to 13 vessels in the same period of 2024, earning on average $13,452 per day.

Looking also here at our operating expenses, those including management fees and G&A expenses, but again, excluding the drydocking costs, averaged $7,419 per vessel per day in the first half of this year, compared to $6,964 per vessel per day for the same period of last year. It is worth noting here that a part of the increase was due to the increase in the dollar-euro exchange rate. And of course, our G&A expenses are divided by 12 ships -- 13 ships that we had during 2024. Looking further down on this table on the last line, we can see the cash flow breakeven level for the 6 months of 2024, which was $11,868 per vessel per day compared to $13,101 per vessel per day for the same period of 2024.

Now let's move to slide 17 to turn our attention to our debt profile. As of June 30 of this year, EuroDry's outstanding debt stood at about $102 million. Total loan repayments during 2025 are expected to amount approximately to $12 million, including $6 million paid during the second quarter of this year. In 2026, we expect total loan repayments of approximately $13.3 million, which includes a $2 million balloon repayment, while in 2027, total repayments are projected to be around $20 million, also including $10.2 million of balloon. An important point to highlight on this slide is the average margin of our debt, which as of June 30, 2025, stood approximately 2.07% of software.

Assuming a 3-month rate as of August 1 of about 4.32%, the estimated cost of our senior debt would be about 6.4%. At the end, our final debt cost is slightly lower as we swap the portion of the so exposure of our debt into a lower fixed rate, bringing the effective cost of our senior debt to just below 6.3%.

At the bottom of the slide, you can see our projected cash flow breakeven level for the next 12 months, broken down into its various components. For example, our EBITDA breakeven level is projected to be around $7,700 per vessel per day, while our overall cash flow breakeven level, including interest expenses and loan repayments to be around $11,850 per vessel per day. This figure, of course, on a net basis, taking into account commission and possible off hire days, we need to achieve a gross time charter equivalent rate of about $13,000 to reach cash flow and earnings breakeven over the next 12 months.

The final slide, let's move to slide 18, where we can see some highlights from our balance sheet in a simplified way. This slide always shows a snapshot of our assets and liabilities. As of June 30, we had cash and other current assets of about $20.3 million alongside advances for new buildings that we did of about $7.2 million, and with the book value of our vessels for approximately $179 million, resulted in a total book value for our assets of about $206.6 million.

On our liability side, we had outstanding debt as of June 30, as mentioned previously, of $102.1 million, representing almost half 49.4% of the book value of our assets, while other liabilities amounted to about $5 million, roughly 2.5% of our total book assets, which in turn resulted in book shareholders' equity of about $90.5 million, translating to a net book value of $32 per share.

According to our estimates, our vessels are worth $190 million, about $10 million more than the respective book value, resulting in a net asset value per share of about $36. If we compare our current trading range of our shares of between $10 and $11, we can see and highlight the potential for appreciation our stock has should market conditions or other catalysts result in a reduction of this discount.

And with this statement, I would like to pass the floor back to Aristides to continue our call.

Thank you, Tasso. Let me now open up the floor for any questions we may have.

(Operator Instructions) Mark Reichman, NOBLE Capital Markets.

I'm looking at the BDI BPI chart on page 8. So while there was some strength in June, the Baltic Dry Index ended June at $14.58, it ended July at $21.08, dipped in early August, but is around $20.51 on August 7. So could you just please talk about the improvement in June and July and your expectations for the remainder of the year?

The first part is easy, which is what has happened. The predictions for the remainder of the year, obviously, is extremely difficult because, as we said, there are various differing directions from various other angles. We did -- I mean, when we saw that tariffs were supposed to come, we saw that people started stockpiling more. And also when we had the Houthi attack in the Red Sea on the bulk vessels, we saw less people going through there.

So these two items led to the spike that we saw up till very recently. This slight correction we are seeing now is probably a reversal of this. It has to do with the summer, et cetera. So this is the easy part, the explanation of what happened and why we saw this spike. Now, what to say about --

Well, so part two of that question relates to pages 8, which is you show the 1-year time charter rates as of August 1, and then also on page 17, your breakeven of your presentation. So are you willing to lock in the rates as of August 1 or do you expect or need rates to go higher? Because it looks like your breakeven kind of is coming down for the full year versus the first half. So at what point do you start locking in the rates?

We are close to the levels that we would lock in rates. We have said internally that around $15,000 if we can do that, it provides a significant profit on ships. We haven't been able to see that yet. We are getting closer to that. And if that happens or not, will really depend on how the market develops within mostly September.

Usually, September seasonally is a good month. We hope this will be repeated this year as well. September, October, they are very good.

Yeah, you can kind of look at that chart. And then just -- this is a question for Tasos. If you could just talk a little bit about EuroDry's liquidity and plans for debt repayment?

Yes. I think it's clear that our liquidity is a bit tight. We had about $6 million of unrestricted cash in our balance sheet, and about almost the same amount is restricted. But we do have certain ways of raising liquidity. One of them is by refinancing some of our vessels.

We have some room through our leverage and our debt, and we have some discussions. Also, we are definitely trying to address certain liquidity requirements later in the year, vis-à-vis our newbuilding program, by looking into financing our predelivery installments.

So we feel that we're on the top of our liquidity needs as far as operations at the current market level is concerned, as I mentioned. And as you mentioned, if the market turns a bit higher, then that would definitely release more liquidity from our operations.

And if I could just get one more in, and that's just what accounted for the decline in voyage expenses from Q1 to Q2?

To some extent, that is a bit -- I don't want to say random, but it depends on the way we do certain charters. If we do voyage charters where we get paid a ballast bonus, then voyage expenses are reflected on our financials. While we do a time charter equivalent basis charter, then voyage expenses are not reflected. So that is one factor contributing to some variability in voyage expenses. Typically, voyage expenses are small for us because we do time charter equivalent basis for our contracts.

So what Tasos is saying that when we (inaudible). Yes, what Tasos is saying is that when we calculate the time charter equivalent, we usually take into account the voyage expenses to come up with that.

Yes. I guess what I'm saying is that if you look -- we just concluded 2 charters for 240, if you look at our website, it will be more clear, where we have a greater ballast bonus into the contract. So there will be a daily rate and a period of balance. During that balancing period, we got forage expenses, but our vogage expenses will appear next quarter, I guess, on our financials. So you will see elevated mortgage expenses because of the nature of the contract we closed.

(Operator Instructions) Poe Fratt, Alliance Global Partners.

You covered a lot of ground. I'd just like to ask a couple of questions about the newbuild program. Tasos, can you remind us of the progress payments due in '26 and '27?

I think there is -- we made already one payment last year, I think. And we have to do one payment in the fourth quarter of this year. That makes it two of the five. And we have to make, I think, more in 2026 and the remaining in 2027. I mean I just want to highlight the profile of all payments are about 10%.

I think the first one was 15%. All payments are 10%.

And then you talked about potentially financing the progress payments in the newbuild delivery payments. Would you have to have a time charter in place before you were able to finance those? Or can you just help me understand what would be required to finance the newbuild program?

Banks are willing to finance predelivery payments as well. So instead of -- in the past, when we had more abundant liquidity, we were paying our equity upfront, the first 4 or 5 payments from equity, and then we're financing the whole contract that, say, 60%. So that was taking care of the last payment. But banks have no problem financing at, say, 60% every payment that we have to make. So until the market tells us a bit more, we will do that for our dry bulk program.

There are no further questions at this time. I would like to return the call back over to Mr. Pittas for closing comments.

Thank you all for participating in this call today. We will be back to you in three months' time with the results of Q3. Thank you.

Thank you. Enjoy the rest of the summer, everybody.

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.