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 and six month periods ended June 30, 2022.
Second Quarter 2022 Financial Highlights:
Total net revenues of $48.5 million. Net income and net income attributable to common shareholders of $30.7 million or $4.26 and $4.24 earnings per share basic and diluted, respectively. Adjusted net income attributable to common shareholders1 for the period was $29.6 million or $4.10 and $4.08 per share basic and diluted.
Adjusted EBITDA1 was $34.2 million.
An average of 16.46 vessels were owned and operated during the second quarter of 2022 earning an average time charter equivalent rate of $33,714 per day.
Declared a quarterly dividend of $0.50 per share for the second quarter of 2022 payable on or about September 16, 2022 to shareholders of record on September 9, 2022 as part of the Company’s common stock dividend plan.
As of August 10, 2022 we had repurchased 40,196 of our common stock in the open market for $0.9 million, under our share repurchase plan of up to $20 million announced in May 2022.
First Half 2022 Financial Highlights:
Total net revenues of $93.9 million. Net income and net income attributable to common shareholders of $60.7 million or $8.40 and $8.36 earnings per share basic and diluted, respectively. Adjusted net income attributable to common shareholders1 for the period was $56.4 million or $7.81 and $7.77 per share basic and diluted, respectively.
Adjusted EBITDA1 was $65.3 million.
An average of 16.23 vessels were owned and operated during the first half of 2022 earning an average time charter equivalent rate of $33,843 per day.
Aristides Pittas, Chairman and CEO of Euroseas commented: “We are very pleased with our results for the last quarter which are the best results we have ever had since the inception of the company. The extremely high charter coverage that we have achieved for the remainder of the year but also for 2023 and 2024 suggest that we should continue experiencing highly profitable quarters regardless of charter rates development.
“One-year time charter rates decreased in July and August by about 10-20% from their all-time highs but still remain at record high levels by any historical comparison. The most notable effect in the market place has been the lack of demand for longer term (three-year plus) charters partly due to the limited availability of vessels and partly because of the wait-and-see attitude of charterers. It appears that demand for transport of finished goods has been influenced by the geopolitical uncertainty and fears of a looming recession fueled by increases in interest rates used by central banks to fight inflation amongst other reasons. In addition to this, the continuing COVID pandemic and its regional flare-ups prompted some countries, mainly China, to impose regional lock-downs that negatively affected containerized trade but also contributed to the inefficiencies of the transportation system.
“There are indeed question marks on how the market will develop in 2023 and 2024 as various contradicting forces come into play. The relatively high orderbook as a percentage of the fleet is likely to result in increased deliveries starting in the latter half of 2023 and during 2024 onwards but on the other hand they will be offset by the effective capacity reductions resulting from the scheduled introduction of the regulations for the greenhouse gases (coming to effect from 2023 onwards) as the new regulations are expected to increase scraping and lower the operating speed of the fleet.
“We feel well prepared to navigate such an uncertain environment as our chartered fleet between now and the end of 2024 is to generate significant cash flow reserves. We intend to use the cash flow we are generating not only to reward our shareholders via our on-going dividend and share repurchase program but also to fund the equity portion of our nine-vessel newbuilding program and still have a significant war chest to pursue investment opportunities in an accretive way to our shareholders.”
Tasos Aslidis, Chief Financial Officer of Euroseas commented: “The results of the second quarter of 2022 reflect the strong charter rates our vessels earned compared to the same period of 2021. Our net revenues increased to $48.5 million in the second quarter of 2022 compared to $18.3 million during the same period of last year. On a per-vessel-per-day basis, our vessels earned a 127.0% higher average charter rate in the second quarter of 2022 as compared to the same period of 2021.
“Total daily vessel operating expenses, including management fees, general and administrative expenses but excluding drydocking costs, averaged $7,732 per vessel per day during the second quarter of 2022 as compared to $6,860 per vessel per day for the same quarter of last year, and $7,534 per vessel per day for the first half of 2022 as compared to $6,887 per vessel per day for the same period of 2021, reflecting a 12.7% and 9.4% increase, respectively, which was mainly attributable to an increase in hull and machinery insurance premiums, the increased crewing costs for our vessels resulting from difficulties in crew rotation due to COVID-19 related restrictions, and the increased lubricants oil costs as a result of the war in Ukraine.
“Adjusted EBITDA during the second quarter of 2022 was $34.2 million versus $10.3 million in the second quarter of last year. As of June 30, 2022, our outstanding debt (excluding the unamortized loan fees) was $105.2 million versus restricted and unrestricted cash of $10.5 million. As of the same date, our scheduled bank debt repayments over the next 12 months amounted to about $40.0 million (excluding the unamortized loan fees), and we are in compliance with all our loan covenants.”
Second Quarter 2022 Results:
For the second quarter of 2022, the Company reported total net revenues of $48.5 million representing a 165.1% increase over total net revenues of $18.3 million during the second quarter of 2021 which was a result of the increased time charter rates our vessels earned in the second quarter of 2022 compared to the same period of 2021 and the increase in the average number of vessels owned and operated in the second quarter of 2022 compared to the same period of 2021. On average, 16.46 vessels were owned and operated during the second quarter of 2022 earning an average time charter equivalent rate of $33,714 per day compared to 14.00 vessels in the same period of 2021 earning on average $14,853 per day. The Company reported a net income and net income attributable to common shareholders for the period of $30.7 million, as compared to a net income of $7.9 million and a net income attributable to common shareholders of $7.6 million, respectively, for the same period of 2021.
Vessel operating expenses were $9.4 million in the second quarter of 2022 as compared to $6.9 million for the second quarter of 2021. The increase is due to the higher average number of vessels owned and operated in the second quarter of 2022 compared to the corresponding period of 2021, the increased crewing costs for our vessels compared to the same period of 2021, resulting from difficulties in crew rotation due to COVID-19 related restrictions, the higher prices in the supply of lubricants and the increase in hull and machinery insurance premiums.
Depreciation expense for the second quarter of 2022 amounted to $4.1 million compared to $1.6 million for the same period of 2021 due to the increased number of vessels in the Company’s fleet and the fact that the new vessels acquired in the fourth quarter of 2021 have a higher average daily depreciation charge as a result of their higher acquisition price compared to the remaining vessels.
Related party management fees for the second quarter of 2022 were also slightly increased to $1.2 million from $1.1 million for the same period of 2021 due to the higher number of vessels in our fleet. General and administrative expenses amounted to $1.0 million for the second quarter of 2022, as compared to $0.7 million for the second quarter of 2021. This increase is mainly attributable to the increased cost of our stock incentive plan.
In the second quarter of 2022 one of our vessels completed her intermediate survey in water, while another one was drydocked in order to pass her special survey, which was completed in the third quarter of 2022. The above drydocking expenses amounted to $0.7 million during the second quarter of 2022. In the corresponding period of 2021, the total cost was $0.1 million, incurred in connection with upcoming drydockings.
During the second quarter of 2021 the Company incurred other operating income of $1.1 million, net, mainly consisting of the proceeds of a claim award related to the sale of one of our vessels, M/V “Manolis P”, for scrap in March 2020 that initially failed to be completed due to COVID-related reasons with the vessel finally being sold to another buyer within the second quarter of 2020. For the same period of 2022, the Company did not incur any other operating income or expense.
Interest and other financing costs for the second quarter of 2022 amounted to $1.1 million compared to $0.7 million for the same period of 2021. This increase is due to the increased amount of debt and the increase in the weighted average LIBOR rate in the current period compared to the same period of 2021.
For the three months ended June 30, 2022 the Company recognized a $0.03 million loss on its interest rate swap contracts. For the three months ended June 30, 2021 the Company recognized a $0.1 million loss on its interest rate swap contract.
Adjusted EBITDA for the second quarter of 2022 was $34.2 million compared to $10.3 million achieved during the second quarter of 2021.
Basic and diluted earnings per share attributable to common shareholders for the second quarter of 2022 was $4.26 and $4.24, calculated on 7,224,424 basic and 7,258,436 diluted weighted average number of shares outstanding, compared to basic and diluted earnings per share of $1.12 and $1.11, respectively, for the second quarter of 2021, calculated on 6,778,829 basic and 6,826,305 diluted weighted average number of shares outstanding.
Excluding the effect on the income attributable to common shareholders of the unrealized gain on derivatives, the amortization of below market time charters acquired and the vessel depreciation on portion of the consideration of vessels acquired with attached time charters allocated to below market time charters, the adjusted earnings attributable to common shareholders for the quarter ended June 30, 2022 would have been $4.10 per share basic and $4.08 diluted, respectively, compared to adjusted earnings of $1.12 per share basic and diluted for the quarter ended June 30, 2021, after excluding unrealized loss on derivatives. Usually, security analysts do not include the above item in their published estimates of earnings per share.
First Half 2022 Results:
For the first half of 2022, the Company reported total net revenues of $93.9 million representing a 187.9% increase over total net revenues of $32.6 million during the first half of 2021. On average, the Company owned and operated 16.23 vessels during the first half of 2022, earning an average time charter equivalent rate of $33,843 per day. For the same period of 2021 the Company owned and operated 14.0 vessels that earned on average $13,523 per day. The Company reported a net income and net income attributable to common shareholders for the period of $60.7 million, as compared to a net income of $11.7 million and a net income attributable to common shareholders of $11.1 million, for the first half of 2021.
Vessel operating expenses for the first half of 2022 amounted to $17.8 million as compared to $13.8 million for the same period of 2021. The increase is due to the higher average number of vessels owned and operated in the first half of 2022 compared to the corresponding period of 2021, in addition to the increased crewing costs for our vessels compared to the same period of 2021, resulting from difficulties in crew rotation due to COVID-19 related restrictions, the higher prices in the supply of lubricants and the increase in hull and machinery insurance premiums.
Depreciation expenses for the first half of 2022 were $7.8 million compared to $3.2 million during the same period of 2021, due to the increased number of vessels in the Company’s fleet and the fact that the new vessels acquired in the fourth quarter of 2021 have a higher average daily depreciation charge as a result of their higher acquisition price compared to the remaining vessels.
Related party management fees for the first half of 2022 increased to $2.3 million from $2.1 million for the same period of 2021 as a result of the higher number of vessels in our fleet.
General and administrative expenses amounted to $2.0 million for the first half of 2022, as compared to $1.5 million for the same period of 2021. This increase is mainly attributable to the increased cost of our stock incentive plan.
In the first half of 2022 three of our vessels completed their intermediate survey in water, one of our vessels completed her special survey with drydock and another entered into a drydock in order to complete her special survey; the latter was completed within the third quarter of 2022. The total cost of the drydockings for the first half of 2022 was $2.5 million. In the same period of 2021, none of our vessels underwent drydocking and certain expenses were incurred in connection with upcoming drydockings.
Finally, during the first half of 2022 and 2021, we had other operating expenses of $0.35 million and other operating income of $1.3 million, respectively. The operating expense for the first half of 2022 relates to the settlement of accounts with charterers, while the operating income for the first half of 2021 mainly consisted of the proceeds from a claim award related to the sale of one of our vessels, M/V “Manolis P”, for scrap in March 2020 that initially failed to be completed due to COVID-related reasons with the vessel finally being sold to another buyer within the second quarter of 2020.
Interest and other financing costs for the first half of 2022 amounted to $2.1 million compared to $1.4 million for the same period of 2021. This increase is due to the increased amount of debt and the increase in the weighted average LIBOR rate of our bank loans in the current period compared to the same period of 2021. For the six months ended June 30, 2022 the Company recognized a $2.3 million gain on its interest rate swap contracts. For the six months ended June 30, 2021 the Company recognized a $0.4 million gain on its interest rate swap contract.
Adjusted EBITDA for the first half of 2022 was $65.3 million compared to $15.9 million achieved during the first half of 2021.
Basic and diluted earnings per share attributable to common shareholders for the first half of 2022 was $8.40 calculated on 7,223,189 basic and $8.36, calculated on 7,256,434 diluted weighted average number of shares outstanding compared to basic and diluted earnings per share of $1.65 and $1.64 respectively, for the first half of 2021, calculated on 6,745,305 basic and 6,789,718 diluted weighted average number of shares outstanding.
Excluding the effect on the income attributable to common shareholders for the first half of the year of the unrealized gain on derivatives, the amortization of below market time charters acquired and the vessel depreciation on portion of the consideration of vessels acquired with attached time charters allocated to below market time charters, the adjusted earnings per share attributable to common shareholders for the six-month period ended June 30, 2022 would have been $7.81 and $7.77, basic and diluted, respectively, compared to adjusted earnings of $1.58 per share basic and $1.57 diluted for the same period in 2021, after excluding unrealized gain on derivatives and loss on sale of a vessel. As mentioned above, usually, security analysts do not include the above items in their published estimates of earnings per share.
