Aristides Pittas
Analyst · Maxim Group
Good morning, ladies and gentlemen, and thank you all for joining us today for our scheduled conference call. Together with me is Tasos Aslidis, our Chief Financial Officer.
The purpose of today's call is to discuss our financial results for the 3-month period ended March 31, 2024. Please turn to Slide 3 of the presentation. Our financial highlights are shown here.
For the first quarter of 2024, we reported total net revenues of $14.4 million and the net loss attributable to controlling shareholders of $1.8 million or $0.65 loss per basic and diluted share. Adjusted net loss attributable to controlling shareholders for the quarter was $3.2 million or $1.18 loss per basic and diluted shares. Adjusted EBITDA for the period was $2.1 million. Please turn to the press release for a reconciliation of adjusted net income and adjusted EBITDA. Our CFO, Tasos Aslidis will go over our financial highlights in more detail later on in the presentation.
As of May 21, 2024, we had repurchased a total of about 300,000 shares of our common stock in the open market for a total of $4.7 million under our share repurchase program of up to $10 million announced in August 2022. The plan renewed in August 2023 for another year.
Please turn to Slide 4 for an overview of our sales and purchase, chartering and drydocking highlights.
On the chartering side, most of our vessels are employed in short-term charters, whilst motor vessel Ekaterini continues to be employed under an index-linked charter until March 2025 at the 105.5% of the average Baltic Kamsarmax index, the index based on the 5 Kamsarmax time charter routes. You can see the specifics of the various charters we fixed in the accompanying presentation.
We plan to continue trading spot for the time being, but if charter rates firm further, we will consider securing a portion of our vessel's earnings via time charter or FFAs.
Regarding dry-dockings and repairs, during the quarter, we had 2 vessels undergoing dry dock, Motor Vessels Blessed Luck and Molyvos Luck. Motor Vessel Starlight underwent its dry dock in April. In addition, Blessed Luck was operationally off-hire for 17 days due to the damage of the auxiliary boiler. The cost of the repairs will be covered by the ship's Hull & Machinery underwriters in full, but unfortunately, the time lost is not. The cost of the 2 dry docks and the resulting idle time, together with the idle time of the Blessed Luck during the repairs, are the primary factors for the loss we incurred during this quarter.
Please turn to Slide 5. EuroDry fleet consists of 13 vessels, including 5 Panamax dry bulk carriers, 5 Ultramax vessels, 2 Kamsarmax and a Supramax dry bulk carrier. Our 13 dry bulk carriers have a total cargo capacity of about 1 million deadweight tons and an average age of 13.5 years.
At this point, I'd like to remind you, as previously announced in our last earnings call, that EuroDry owns 61% of the entities that own motor vessels Christos K and Maria. The remaining 39% is owned by owners represented by NRP Project Finance, otherwise referred to as the NRP investors.
Please now turn to Slide 6 for a further update on our fleet employment. As you can see, fixed rate coverage for the remainder of 2024 stands at around 27%.
Turning to Slide 7, we go over the market highlights for the first quarter ended March 31, 2024, and up until recently. Spot rates continued their momentum from late 2023 and experienced an unusually strong first quarter, supported by key commodity exports and the Red Sea and Panama Canal disruptions, counter to the typical seasonal trends.
In the first quarter of 2024, the average spot market rate for Panamaxes hovered around $13,600 per day. By May 17, the spot rates have increased to approximately $15,000 per day. In parallel, the 1-year time charter rates for Panamaxes were around $15,600 per day during the first quarter, rising to $16,150 by May 17, versus about $14,300 last year. Including 1 year rate relative to spot prices may suggest that, overall, the sector seems set for a more positive 2024 than 2023.
Please now turn to Slide 9. The IMF's latest update in April 2024 projects that the global economy will continue to grow at 3.2% in 2024, the same pace as in 2023, and this growth rate is expected to continue into 2025. This is largely due to a sizable improvement in the economic outlook for the United States, offset by a more modest slowdown in emerging and developing economies.
In one of the biggest changes, Russia's 2024 growth forecast was increased to 3.2% from the 2.6% projected by the IMF in January 2024 due to continued strong oil exports amid higher global oil prices, despite the price cut mechanism imposed by Western countries as well as strong government spending and investments related to more production, along with higher consumer spending in a tight labor market.
The IMF also upgraded Russia's 2025 growth forecast to 1.8% from 1.1% previously.
Clearly, the sanctions imposed by the West do not seem to be working. The forecast for the next 5 years globally is at its lowest in decades at 3.1%. Global inflation is declining steadily and is projected to lower from 6.8% in 2023 to 5.9% in 2024 and 4.5% in 2025, with advanced economies returning to their inflation target sooner than emerging markets and developing economies.
The global economy remains surprisingly resilient despite significant central bank interest rate hikes to repair the price stability. Both banks now anticipate -- most banks now anticipate that the 3 Federal Reserve rate cuts projected for the end of 2024 will be reduced to one due to this persistent inflation.
For shipping, we continue to closely monitor China's economy, which is affected by the enduring downturn in its property sector. The Chinese economy is forecast to grow by only 4.6% in 2024 and 4.1% in 2025. However, China's economic growth may further intensify due to trade tensions in an already weakened geopolitical environment and stability may take even longer to be restored.
On the other hand, though, growth in India is projected to remain strong at 6.8% in 2024 and 6.5% in 2025, with robustness reflecting strong domestic demand and the rising working age population.
Finally, the ASEAN-5, according to the IMF, will continue to grow quite strongly in the next couple of years, providing significant shipping support. According to Clarksons, demand for dry bulk trade is presently expected to grow by 2.4% in 2024, slightly below the fleet growth. This includes about a 0.6% uplift for full year 2024 due to the Red Sea and Panama Canal disruptions. A longer duration of disruptions in these regions will potentially drive demand higher. In addition, the combined effect on demand due to slower average speeds and increased congestions could lend further support for stronger dry bulk demand in 2024.
Demand in 2025 is projected by Clarksons to grow by about 1.5%, assuming the Red Sea disruption has eased by the end of this year.
Please turn to Slide 10. Uncertainty about the future of fuels and high new building prices have led to the low order book continuing. As of May 2024, the order book as a percentage of total fleet is at only 9.3%, near the lowest historical levels. This suggests low fleet growth over the next 2 to 3 years.
Complementing this low fleet growth, we also have the effect of increased slow steaming and expected scrapping due to the introduction of the new environmental regulations. This could reduce the effective available bulk supply even further.
Turning to Slide 11. Let us now look into the supply fundamentals in a bit more deeply. As of May 2024, the total dry bulk vessel operating fleet was 13,700 vessels. According to Clarksons' latest report, new deliveries as a percentage of total fleet are expected to be 3.6% in 2024, 3.2% in 2025, and 3.5% in 2026 onwards. The actual fleet growth is, of course, expected to be lower than the aforementioned figures due to scrapping and slippage. Also note that 9% of the fleet is older than 20 years old, and therefore, a good candidate for scrapping, especially if the market remains at current levels or lower.
Please turn to Slide 12 where we summarize our outlook for the dry bulk market. Dry bulk shipping showed a modest decline during the first quarter of 2024, following a peak in December. Despite this decrease, Q1 of 2024 marks the highest marked level for this typically slow season since 2010 with the exception of 2022, primarily due to the geopolitical and weather-related disruptions as discussed previously.
The outlook for the remainder of 2024 suggests a robust bulk carrier market with rates around current levels. The recent strength in market conditions is largely attributable to tensions in the Suez Canal, which have significantly increased tonmiles. As and when these disruptions begin to ease or resolve, demand patterns are anticipated to normalize, although this adjustment may take a considerable amount of time to fully materialize.
Clarksons assumes Red Sea rerouting is currently adding 1.2% to dry bulk tonmile demand. Assuming half a year of rerouting due to these disruptions, which will then ease back to normal, this adds 0.6% to the full year of 2024 tonmile demand growth. Assuming subsequent easing, this will subtract a similar figure from 2025 tonmile demand growth. It is all quite uncertain, though, and will largely depend on the geopolitical developments, so it is possible that disruption could be as quickly or could take significant amount of time.
In any event, in 2025, bulker earnings are expected to be softer as diminished fleet and fleet inefficiencies and the cumulative growth of the fleet in recent years have offset the strong trade rebound. On the other hand, the decarbonization process is expected to affect trade lines and dry bulk volumes going forward positively by resulting in slower speeds and more scrapping, but negatively if less coal is transported. The overall effect from the market is hard to predict.
On the supply side, though, the ordering of new ships has been very limited due to the lack of available slots at shipyards and uncertainty about the fuel of the future, despite significant orders for methanol fuel ships. The order-book-to-fleet ratio remains nearly historically low levels, as said before, setting the stage for a potential recovery in charter rates should demand increase.
Furthermore, introduction of emissions regulation related measures could further curtail supply via increased scrapping or slower operational speed for a portion of the fleet. EEXI, CII, EU ETS, FuelEU are all new acronyms the industry will need to cope with and more are to come.
Let's turn to Slide 13. The left side of the slide shows the evolution of 1-year time charter rates of Panamax dry vessels over the last 20 years. As of May 17, 2024, the 1-year time charter rate for Panamax ships with a capacity of 75,000 deadweight tons stood at $16,150 per day, which is about 20% above the historical median of around $13,500 per day.
On the other hand, 10-year-old Panamax vessel prices have reached the maximum price seen in the last 10 years, around $29.5 million, as can be seen in the right-hand side graph. This is significantly higher than the 10-year historical average price of $16.8 million and the median price of $14.75 million. At current secondhand prices, we are reluctant to purchase more vessels. We are happy to keep on running the fleet at market rates, strengthening the balance sheet, reducing debt, and waiting for new opportunities to present themselves.
Let me now pass the floor over to our CFO, Tasos Aslidis, to go over the various financial highlights in more detail.
