EuroDry Ltd. (EDRY) Q2 2026 Earnings Report, Transcript and Summary

Thank you for standing by, ladies and gentlemen, and welcome to the EuroDry Limited Conference Call on the Second Quarter 2026 Financial Results. We have with us today, Mr. Anastasios Aslidis, Chief Financial Officer; and Ms. Athina Atalioti, Finance Manager of the company. [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 to Mr. Aslidis, I would like to remind everyone 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 #2 of the webcast presentation, which has the full forward-looking statement and the same statement that was also included in the press release. Please take a moment to go through the whole statement and read it. And now I would like to pass the floor to Mr. Aslidis. Please go ahead, sir.

Thank you. Good morning, ladies and gentlemen, and thank you all for joining us today for our schedule conference call. Together with me is Ms. Athina Atalioti, our Finance Manager. The purpose of today's call is to discuss our financial results for the three- and six-month periods ended June 30, 2026. For that, please turn to Slide 3 of the presentation. Our financial highlights are shown here. For the second quarter of 2026, we reported total net revenues of $17.7 million and net income attributable to controlling shareholders of $6.59 million or $2.32 per diluted share. Adjusted net income attributable to controlling shareholders for the quarter was $6.95 million or $2.44 per diluted share. Adjusted EBITDA for the quarter was $11.71. Please refer to the press release for the reconciliation of adjusted net income and adjusted EBITDA. Athina will go over our financial highlights in more detail later on the presentation. Since initiating our $10 million share repurchase program in August 2022, we have repurchased 358,130 shares of common stock in the open market for a total of $5.8 million. Our Board reapproved the program recently and extended annually. And the most recent authorization is granted earlier this month and runs for another year. We will continue to execute repurchases in a disciplined measured manner based on market conditions and other capital allocation priorities. We're also pleased to announce that on July 28, 2026, we signed a term sheet to refinance the MV Ekaterini, one of our Kamsarmax vessels with a $19 million loan facility, higher by almost $8 million over the existing balance of the loan, further boosting our liquidity. This agreement is subject to customary closing documentation. Let's now move to Slide 4. In that slide, we outlined our chartering and operational developments. In the second quarter, we continue to deploy our fleet with flexibility. Four of our vessels are currently operating on index-linked charters tied to the average Baltic Supramax S10TC Index, which provides direct exposure to market conditions, while, as I mentioned, maintaining operational flexibility. Our remaining vessels are employed on fixed rate time charters with most trading durations of one to three months. The exception is our vessel MV Christos K, which is fixed on a longer-term charter through November 2026. Further charter details are provided in the following slide. In the second quarter, we entered into two forward freight agreements. On November 19th and on March 30th, we sold two 90-day Kamsarmax 825 TC average contracts for the third quarter of 2026 at $17,250 and $17,100 per day, respectively, each equivalent to one vessel. These contracts I mentioned are based on the Kamsarmax 825 TC index, which cover the five major time charter routes and put a good hedge on our market exposure. Similar contracts for the second quarter of 2026 were settled very close to the rates agreed in the FFA contract. A final point on this slide is that operationally, we have no idle period for the quarter, commercial or dry dockings, during the second quarter. Let's move to Slide 5, which provides an overview of our fleet. Today, we operate a fleet of 11 vessels with total carrying capacity of approximately 766,000 deadweight tons and an average age of around 13.8 years. In addition, we have four newbuildings on order. Two Ultramax vessels are scheduled for delivering in the second and third quarters of 2027, each with capacity of 635,000 deadweight tons. We also have two Kamsarmax vessels on order scheduled for delivery in the first and second quarters of 2028, each with capacity of 82,000 deadweight tons. Upon delivery of these four vessels, our fleet will grow to 15 vessels with a total carrying capacity of approximately 1.06 million deadweight tons, including an Ultramax segment of eight vessels, a Kamsarmax segment of four vessels, all of these vessels being eco-friendly ones, while continuing saving our three legacy Panamaxes, which are all three Japanese-built. Next, let's move to Slide 6, where we show our fleet employment profile. Our current fixed rate coverage for the remainder of the year stands at a little more than 25% based on existing charter arrangements. This excludes our four vessels operating on index-linked charter. Let's now move to Slide 8 to review key market developments for the second quarter and recent trends to late July. Panamax rates averaged $17,969 per day in the second quarter and have moderated slightly to $17,150 as of the end of last week. On the time charter side, one-year time charter rates have also strengthened. Clarksons set the standard Panamax one-year time charter rate at approximately $17,175 per day as of July 31. Notably, time charter rates are now trading in line with spot market levels, reflecting continued confidence in the underlying market outlook. During the second quarter, the dry bulk, the Baltic Dry Index and the Baltic Panamax Index recorded year-over-year increases of approximately 78% and 54%, respectively, reflecting the strengthening of the dry bulk freight market compared to the second quarter of last year. Please now turn to Slide 9. Here, we review the global macroeconomic backdrop and its implications for dry bulk shipping demand. According to IMF July [Break]

[Music] You may continue.

Thank you, operator. Apologies to everybody for the interruption. I'm going to pick up my presentation. I believe we dropped the line on Slide 9. So please turn to Slide 9. Here, we review the global macroeconomic backdrop and its implication for dry bulk shipping demand. According to IMF's July 2026 World Economic Outlook update, global growth is projected to slow to 3% in 2026 before recovering to 3.4% in 2027, broadly unchanged cumulatively from April's forecast. The world is navigating several competing forces. On the one hand, we have elevated energy prices continuing to push inflation and interest rates higher, while AI-driven investment is supporting growth for countries integrated in the global technology value chain. Meanwhile, global disinflation has stalled with the inflation shock pushing the yield of the 10-year treasury, U.S. treasuries to approximately 4.7%. Geopolitical developments, mainly the Iran conflict and the continuing Ukraine-Russia war have led to increased and volatile energy prices and created inflationary pressures, which in turn might lead to higher interest rates. In the overall context, the U.S. economy has remained comparatively resilient. In its July 2026 economical mentioned, the IMF maintains its U.S. growth forecast at 2.3% for 2026 and revised its 2027 forecast upward to 2.2%. China is projected to grow 4.6% this year, supported by front-loaded public infrastructure investment and a surge in high-tech manufacturing and in exports. The ASEAN-5 region is projected to slow to 4.1% in 2026, down from 4.5% in 2025 before recovering to 4.3% in 2027, while a level of China's growth is now expected to reach. As far as global trade goes, world trade volume growth is projected to slow from 5% the overall trade in 2025 to 3.5% in 2026 before recovering to 4.3% in 2027. This moderation reflects the unwinding of earlier front-loading effect of tariffs and the continuing impact of tariffs on trade. The recovery in 2027 reflects a gradual adjustment as these dynamics gradually normalize through trade diversion, rerouting and the continued expansion of technology-related trade flows. Looking specifically at the dry bulk sector, Clarksons projects ton-mile growth at 3.8% in 2026 and 1.8% in 2027, reflecting continued expansion in global commodity trade despite a challenging macroeconomic backdrop. Let's now move to Slide 10 as we can review the current state of the dry bulk order book. As of July 2026, the order book stands at 14.4% of the existing fleet. Although higher than the 7% order book level recorded in 2021, it remains among the lowest levels in history. For context, the order book accounted for 66% of the fleet in 2008 and around 24% in 2014. Turning to Slide 11. We're examining the supply fundamentals in a little more detailed fashion. The total dry bulk fleet on the top of the slide currently consists of around 1.1 billion deadweight tons and has grown 3.3% year-on-year. Looking at the age profile of the fleet, roughly 11.8% of the total fleet is over 20 years old, representing vessels that could be considered for scrapping if market conditions moderate or environmental regulations become more stringent. According to Clarksons latest estimates, scheduled newbuilding deliveries as a percent of the existing fleet are projected at 4.5% for both 2026 and 2027 and 6.9% for 2028 and beyond. To put it in context, in May, scheduled deliveries for 2028 and beyond were 5.5%. So additional orders placed are to be delivered after that year. Actual fleet growth, of course, is expected to be lower, slightly lower than these numbers as slippage and demolition activity will offset a portion of the gross number of deliveries. Let's now turn to Slide 12, where we will share our perspective on where the market stands and what we are monitoring. The market has demonstrated a solid performance in 2026 with rates having recovered meaningfully. Supramax and Panamax time charter rates have recovered to levels last seen in March 2024. This rate recovery reflects sustained demand for tonnage driven by robust commodity flows, particularly iron ore, grain and bauxite, which have supported healthy fleet utilization. Looking ahead to the second half of 2026, there are several demand side fundamentals to watch. Iron ore exports from Australia and Brazil remain stable, while the Simandou project continues to ramp up production every year. Chinese import demand despite broader economic headwinds has remained resilient. Grain and minor bulk trades have proven more durable than might be expected given ongoing geopolitical tensions in the Middle East, indicating underlying strength in agricultural commodity shipments. Coal has stalled year-to-date due to softer Chinese and Indian demand and Indonesian export limitation, although recent shifts in Qatar's energy infrastructure have created emerging support for coal from Japan and South Korea. The potential U.S.-Iran agreement could contribute to gradual normalization of vessel traffic in the Gulf, although always implementation risks remain. Such an agreement could improve overall market sentiment and reduce vessel repositioning inefficiencies. However, a normalization of LNG trade flows could moderate oil demand as scrap tonnage is released in the market. On the supply side, ordering activity, as I think I mentioned earlier, has accelerated in recent months. Nevertheless, the overall order book remains relatively modest by historical standards. Looking ahead to 2027, our analysis suggest a balanced but more uncertain market environment. Fleet is expected to continue growing at similar rates as in 2026, while demand growth, as we mentioned earlier, would depend on Chinese steel production effects on coal trade and production from a possible conclusion of the Iran war. The market outlook will also be influenced by several variables, including geopolitical developments, Red Sea routing dynamics, U.S.-China trade relations, the pace of Simandou project execution and ramping up, vessel speeds and demolition activity. One should anticipate a more balanced market in 2027, though fundamentals should remain supportive relative to historical norms. Let's now turn to Slide 13 for a quick review of our position in the dry bulk market cycle as we have always found helpful to benchmark the present market against its historical context. As of July 31, 2026, Panamax one-year time charter rates stood at $17,125 per day, meaningfully above the historical median of $13,450 per day. This strength or similar strength is also reflected in asset values. Values for a 10-year-old Panamax are currently priced at approximately $30.5 million, well above both the historical median of $19.5 million and the 10-year average of about $19.2 million. currently near 10-year highs. In this environment, we have made a deliberate decision to pursue investments in newbuilding vessels rather than acquire second-hand tonnage at market peak levels. This strategic choice reflects our conviction in both current market fundamentals and our longer-term intended fleet positioning. While secondhand prices are elevated, we believe new buildings represent better value and offer superior operational efficiency, lower emission profiles and reduced maintenance exposure, factors that we believe are increasingly important. Our Fleet Renewal Program demonstrates a disciplined and measured approach to capital allocation. We have ordered four newbuildings, two Ultras and two Kamsarmax vessels at reasonable prices with staggered deliveries through 2028, which we believe will enhance our earnings power when the market conditions normalize, while simultaneously reduce our exposure to aging tonnage and associated inefficiencies. I will now turn the call over to Athina, our Finance Manager, for a closer look at our second quarter financial performance. Athina?

Thank you very much, Anastasios. Good morning from me as well, ladies and gentlemen. Over the next five slides, I will give you an overview of our financial highlights for the second quarter and first half of 2026 and compare those results to the same period of last year. For that, let's turn to Slide 15. For the second quarter of 2026, the company reported total net revenues of $17.7 million, representing a 57% increase over total net revenues of $11.3 million during the second quarter of 2025. As a result of the higher time charter rates our vessels earned during the second quarter of 2026 compared to the same period of 2025. The company reported a net income attributable to controlling shareholders of $6.6 million as compared to a net loss attributable to controlling shareholders of $3.1 million for the same period of 2025. Interest and other financing costs for the second quarter of 2026 decreased to $1.5 million compared to $1.7 million for the same period of 2025. Interest expense during the second quarter of 2026 was lower, mainly due to the decreased benchmark rates of our loans and a decreased average debt during the second quarter of 2026 as compared to the same period of last year. Adjusted EBITDA for the second quarter of 2026 was $11.7 million compared to $1.9 million achieved during the second quarter of 2025, recording a larger than a fivefold increase over the same period of last year. Basic and diluted earnings per share attributable to controlling shareholders for the second quarter of 2026 was $2.36 and $2.32, respectively, calculated on approximately 2.8 million basic and diluted weighted average number of shares outstanding, compared to a basic and diluted loss per share attributable to controlling shareholders of $1.12 per share for the second quarter of 2025, calculated on approximately 2.7 million basic and diluted weighted average number of shares outstanding. Excluding the effect on the net income attributable to controlling shareholders for the quarter of the unrealized loss on derivatives, the adjusted earnings attributable to controlling shareholders for the quarter ended June 30, 2026, would have been $2.49 and $2.44 per share basic and diluted, while for the second quarter of 2025, it would be $1.1 per share basic and diluted. Let's now look at corresponding six-month period ended June 30, 2026, and compared to the same period of 2025. For the first half of 2026, the company reported total net revenues of $30.5 million, representing a 49% increase over total net revenues of $20.5 million during the first half of 2025, which was the result of the higher time charter rates our vessels earned during the first half of 2026 compared to the same period of 2025. The company reported a net income attributable to controlling shareholders of $6.8 million as compared to a net loss attributable to controlling shareholders of $6.8 million for the first half of 2025. Interest and other financing costs for the first half of 2026 amounted to $3 million compared to $3.5 million for the same period of 2025. This decrease is mainly due to the decreased benchmark rates of our loans and a decreased average debt during the first half of 2026 as compared to the same period of last year. In the first half of 2025, the company signed an agreement to sell motor vessel passes for demolition for approximately $5 million. The vessel was delivered to its buyers in March 2025, resulting in a gain of $2.1 million. There were no vessel sales in the first half of 2026. Adjusted EBITDA for the first half of 2026 was $16.6 million compared to $0.85 million achieved during the first half of 2025, an 18-fold increase compared to the same period of 2025. Basic and diluted earnings per share attributable to controlling shareholders for the first half of 2026 was $2.45 and $2.41, respectively, calculated on approximately 2.8 million basic and diluted weighted average number of shares outstanding compared to a loss per share of $2.47 calculated on approximately 2.7 million basic and diluted weighted average number of shares outstanding. Excluding the effect on the net income attributable to controlling shareholders for the first half of the year of the unrealized loss on derivatives, the adjusted earnings attributable to controlling shareholders for the six-month period ended June 30, 2026, would have been $2.61 and $2.57 per basic and diluted share, respectively. For the first half of 2025, excluding the effect on the loss attributable to controlling shareholders of the unrealized loss on derivatives and the net gain on sale of vessel, the adjusted net loss attributable to controlling shareholders would have been $3.17 per share basic and diluted. Let's now move to Slide 16 to review our fleet performance for the second quarter of 2026 with a comparison to the same period of 2025. During the second quarter of 2026, both our commercial and operational utilization rates reached 100% compared with commercial utilization of 100% and operational utilization of 99.3% in the second quarter of 2025. On average, 11 vessels were owned and operated during the second quarter of 2026, adding an average time charter equivalent rate of $20,398 per day compared to 12 vessels in the same period of 2025, adding on average $10,428 per day. This reflects a more than doubling of daily charter rates on a per vessel basis year-over-year for the respective periods. Turning to operating costs. Total operating expenses, including management fees, G&A expenses, but excluding dry docking costs were $7,444 per vessel per day during the second quarter of this year compared to $7,539 per vessel per day for the second quarter of 2025, reflecting a slight decrease. Before we move further down, we can see our daily cash flow breakeven rate, which takes into account the operating expenses, drydocking costs, interest expense and scheduled loan repayments but exclude balloon payments. This stood at $11,858 per vessel per day compared to $12,222 per vessel per day for the second quarter of last year. Let's now turn to the right-hand side of the table and review the same metrics for the first six months of 2026 compared with the corresponding period of 2025. During the first six months of 2026, our commercial and operational utilization rates were 100% and 99.9%, respectively, compared with 99.2% for both commercial and operational utilization during the first six months of 2025. On average, 11 vessels were owned and operated during the first half of 2026, earning an average time charter equivalent rate of $17,452 per day compared to 12.4 vessels in the same period of 2025, earning on average $8,761 per day. Our operating expenses, including management fees and G&A expenses averaged $7,462 per vessel per day in the first half of this year compared to $7,419 per vessel per day for the same period of last year. Including interest expense, dry docking and loan repayments without balloon repayments, the cash breakeven rate amounted to $12,198 per vessel per day for the first 6 months of 2026 compared to $11,869 per vessel per day for the same period of 2025. Please turn to Slide 17. This slide serves as a calculation tool which enables our shareholders and investors to assess the earnings potential in the remainder of 2026 in the current environment. The table shown in this slide has two components. The top chart refers to our fixed rate contracts, starting with our fixed rate contracts, coverage is approximately 28% for the remainder of 2026. This is about 50% in the third quarter and about 6% in the fourth quarter of 2026. The table also shows the average contracted daily charter rate and the resulting EBITDA contribution for the contracted days. The second section of the table estimates the EBITDA contribution from our remaining open and index-linked days. For this purpose, we use the current forward freight market rate for the Supramax and Panamax, Kamsarmax, and Baltic forward rates as of July 30, 2026. These forward market assumptions are then translated into an indicative blended earning rate for our open days, which you can see across the Supramax, Panamax and Kamsarmax forward rates. Based on these assumptions and by further assuming a $7,500 per day per vessel OpEx and G&A cost and the 5% commission rate, one can calculate the EBITDA contribution. The final result is additionally adjusted for our preliminary dry docking expenses expected during the year. This calculation results in an annualized EBITDA contribution of $38.4 million during 2026. Naturally, investors can adjust the forward freight rate assumptions to evaluate different market scenarios and their potential impact on the company's earnings. In the rest of 2026, we can also easily estimate our EBITDA dependence to the average rate earned by our open days. For example, a change of $1,000 per day in the average rate and would result in a $1.4 million change in our 2026 EBITDA and have a $0.5 change on the earnings per share. Let's now move to Slide 18 to review our debt profile and cash flow breakeven estimates. As of June 30, 2026, our outstanding debt stood at $98.1 million with an average margin of about 1.99%, assuming a three-month rate of 3.75% as of June 30, 2026, the all-in cost of our senior debt averages at 5.74%. The upper chart illustrates our debt amortization schedule. Scheduled debt repayments totaled approximately $12.2 million during 2026, $21 million in 2027, $17 million in 2028 and $28.8 million in 2029, inclusive of balloon payment of approximately $1.2 million, $10.2 million, $6.7 million and $19 million, respectively. We have routinely been able to refinance balloon payments in the past, and we are confident that we would be able to do the same if we choose so in the future. Please note that although we have arranged the debt financing of our two Ultramax newbuildings, our current debt figure that I quoted includes only the portion of one of the two loans drawn to date, representing the predelivery payments made thus far. The 2027 and 2028 repayment figures include scheduled repayments under both new building loan facilities to finance our Ultramax newbuildings, which are scheduled for delivery during the second and third quarter of 2027. Our debt figures do not include any debt that we would draw to finance the Panamax newbuildings or the refinancing of MV Ekaterini. Turning to the bottom of this slide, we present our cash flow breakeven estimates for the next 12 months broken down by major components. Our EBITDA breakeven level is at $8,458 per day, while our all-in cash flow breakeven incorporating operating expenses, dry docking costs, interest expense and loan repayment is estimated at $12,872 per day. Let's move now to my final slide, slide 19, to review some highlights from our balance sheet as of June 30, 2026. This slide offers a snapshot of our assets and liabilities and provides a concise picture of our financial position. Cash and other assets stood at approximately $37.5 million. advances for newbuildings amounted to approximately $14.4 million and the book value of our vessels was approximately $160.2 million, bringing our total assets to approximately $212.5 million. On the liability side, total debt stood at approximately $98.1 million, while other short-term liabilities amounted to $5 million for combined liabilities of approximately $103.1 million, representing approximately 48.5% of total assets. After excluding the equity attributable to minority interest in the amount of $9.4 million, the shareholders' equity of common shareholders on a book value basis stood at approximately $100 million or $34.92 per share. However, based on our internal estimates and external valuations, the market value of our fleet is meaningfully above its book value. We estimate the current market value of our vessels at approximately $240 million compared to a book value of approximately $160 million, implying an exit value of approximately $80 million. Adjusting for this difference yields an estimated net asset value in excess of $6.81 per share. When compared to the recent trading range of our shares, which has moved up to around $28 recently, it becomes evident that still there is a substantial discount to our estimated Net Asset Value and by extension, a significant upside potential for both shareholders and potential investors. With that, I will hand the call back to Anastasios to continue.

Thank you very much, Athina. We would like to open the floor now for questions if there are any.

[Operator Instructions] First question comes from Tate Sullivan with Maxim Group.

And just a couple for me. The first on the debt margin of 1.99%. I think that was your average margin in June. Might that, do you think that will change going forward if you do decide to add any debt with your new builds? Or do you have more recent indications of a lower spread to SOFR?

Most likely, if it changes, will go down. I think we are getting quotes from our banks well below 2%, closer to 1.5% lately. And I think, in fact, the latest loan that refinanced we did was much closer to 1.5%. So the average, if anything, will come down.

Okay. And then on, and it's great for the last couple of quarters, including the slide on the forward EBITDA sensitivity. And then I just noticed that the dry docking days estimates for the second half, you now have 17. And I think in the first quarter presentation, you had two. I'm sorry if I missed something, but did you move forward some dry dock days from 2027?

We might have, I think that involves our vessel, Alexandros, which is dry docking falls right on the third or the fourth quarter. So now we have the budgeted 20 something, 22, 23 days. Now we have 16 on Q4 and the remaining on Q1 '27. So, I mean, that changes based on operational plan.

Okay. I mean it's impressive with the fleet renewal and adding new builds, I mean, your off-hire days decreased from, I have 97 in 2025 now to what, maybe 36 this year. In 2027, we will probably the off-hire days increase a little bit just based on timing? Or is that not necessarily?

It depends on, I mean, we, that's why we make a distinction between commercial and operational hire, of course. We have off-hire days due to the dry dockings, which we don't count in these figures. But we hope that we're going to keep to minimum the operation of the commercial. Obviously, we have in 2027 a couple of dry docking, an additional dry docking schedule. I think it's the vessel Starlight that is coming due for dry dock and some in-water surveys. So there will be some off hire days on the basis of the dry dockings and the in-water surveys.

Okay. And last for me, I noticed you put the word, you put Indonesia in the market commentary slide and hearing from some other companies on more export restrictions or changes thereof from Indonesia. Do you think that's a more important consideration for your fleet going forward than anything going on in the Middle East in terms of exports?

I think by far, not only for us, for the whole market, anything going on in the Middle East is the overwhelming consideration because it has so many side effects either in the form of direct effects on trade or on inefficiencies introduced in the various routes.

Next question from Mark Reichman with NOBLE Capital Markets.

I've got several questions here. The first is on the voyage expenses. So during the quarter, voyage expenses had a positive impact of $1.5 million on your operating expenses. And I understand that's related to the bunker fuel. But what would your expectations be for the, maybe if you could just maybe provide a little more color on that number and maybe expectations for the second half of the year.

I mean, as you have insinuated, this number typically has to be a small negative number because our vessels are chartered on a time charter basis. The fuel costs are paid generally by the charterer. So a little bit of voyage expenses is left for us for certain situations. However, we deliver our vessels with fuel in their tanks, and we buy back fuel when the vessels are delivered to us. So in an environment with increasing oil prices, you tend to make money on the fuel, what you take back at the pre-agreed price, if the price has increased in between while the charter was being performed and you resell to the next charter, you record the gain. So during the second quarter, the oil price was increasing, and we benefited from that trend. Obviously, if the oil price is stable, you would expect that number to be near zero, I mean, the gains. And if the oil price is dropping, you will probably have to give back some of those gains.

Okay. So just looking at the forward curve on crude oil, you might expect that maybe the second half, you'll have a little bit of an expense or stay relatively flat. Is that a good way to think about it?

A small negative number is expected because of the nature of the chartering we do. We do time charters, and we don't have major voyage expenses, but we do have some. And those should always be recorded as a negative number. So, if the number is positive, it is the situation that I mentioned.

Okay. And then second question is just that vessel operating expenses have remained well controlled despite inflation. So, would you expect daily operating expenses to remain near current levels? Or are there any cost pressures from labor maintenance or regulatory compliance?

I think we expect it to remain near our budget levels. I think we are doing well versus our budget. Our budget was slightly higher compared to last year, I think less than 3% overall. And we recently, comparing the results to our budget, we are just on budget or maybe a little less. I have no reason to feel that the second half would result in higher operating expenses. We cannot exclude that possibility, but we can take into account when we did our budget, the new levels of all the costs and inflationary pressures.

Okay. And then just on the chartering strategy, several vessels roll off charter between August and November, while others remain index linked. Are you inclined to lock in longer-term fixed rates or retain greater exposure to the spot market? I'm assuming kind of the latter based on the commentary.

I think when we discussed in our last Board meeting, the chartering strategy, the support was to put a few more vessels on one-year charters, let's say, if certain levels in the high teens or if we can find charters that start with a two for one year, then we might put a few more of our vessels on longer-term charters. So that's the approach. If we are in the mid-teens and below, we try to be on the spot market. If we're approaching the high teens and beyond that, we try to secure some of our tonnage on longer-term charters.

Okay. And then my last question is just more of a macro question. And that is with the earnings improvement, there's always the argument structural versus cyclical. And maybe it was a couple of weeks ago, the management of a Capesize vessel operator had made the comment that vessel supply rather than demand represented the critical driver of future market conditions, and they had cited their historically low Capesize order book together with the aging fleet is kind of an important structural support that might outweigh any economic or macroeconomic uncertainty. So you've got kind of a structural support there. Would you say the same is true for the vessel classes that you operate? Or do you think you're a little more exposed to cyclical? Maybe just a discussion on kind of the cyclical versus structural in terms of the market outlook.

I mean cyclicality comes both from demand and supply. For our sizes, the middle range of sizes, Ultramax and Panamax, the order book is a little higher than the Capesize order book, but the age profile of the segments is older. The average age is higher. So that counterbalances the lower order book, I guess, of the Capesize in some sense. And if anything, if regulations become stricter, it would have more of an effect on the, in an older vessel than on a newer one. So I believe that in our case, too, the order book is still a supporting factor. But it has been a supportive factor for the last three or four years, and the market did not do well in 2025, especially in late 2024. So demand was really the determining factor then. And I believe that's why we talk about the supply-demand balance, both sides of the equation are equally important. I think demand during this year has improved for all the reasons that we discussed, and it was supported by a good supply story. We feel that, that will continue in 2026, and we are hopeful that it will continue in 2027.

Was a very concise answer. I really appreciate that. Thank you.

That concludes today's Q&A session. I will turn the call back over to the CFO for any closing comments.

I would like to thank everybody for attending our call. Wish you have a nice remaining summer and look forward to welcoming you to our November call. Thanks all.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.