Aristides J. Pittas
Analyst · Maxim Group
Thank you. 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 and 6- month period ended June 30, 2025. Please turn to Slide 3 of the presentation for our quarterly financial highlights. For the second quarter of 2025, we reported total net revenues of $57.2 million and a net income of $29.9 million or $4.29 per diluted share. Adjusted net income for the quarter was $29.2 million or $4.20 per diluted share. Adjusted EBITDA for the period stood at $39.3 million. Please refer 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. The company has declared a quarterly dividend of $0.70 per share for the second quarter of 2025, which will be payable on or about September 16, 2025, to shareholders of record as of September 9. This reflects a $0.05 increase or approximately 7.7% growth in the quarterly dividend payout compared to the $0.65 per share distributed in the first quarter. This highlights our confidence in Euroseas' operating strength and sustained cash flow generation. At the current rate, the increase to $0.70 per share corresponds to an annualized dividend yield of about 5.5%, which we believe is attractive and competitive within the containership sector, reflecting our ongoing commitment to deliver value to our shareholders. Based on our charter coverage, we are very confident that our current dividend yield may be maintained comfortably for the next couple of years at least. Since initiating our share repurchase plan of up to $20 million in May 2022, we have repurchased 463,000 shares of our common stock in the open market for a total of about $10.5 million as of August 13, 2025. We will continue to utilize our repurchase program in a disciplined manner as our management team may decide that enhances our long-term shareholder value. Moreover, we are excited to announce the publishing of our 2024 ESG report, which is available on our website under the Sustainability section. This is the fifth consecutive year that we've published such a report. We are pleased to say that we feel the whole office is taking pride in our developments on all aspects of ESG and that the various KPIs we use to monitor our performance are mostly showing positive signs. Please turn to Slide 4, where we discuss our recent developments, including an update on our sales and purchase chartering and operation highlights. During the quarter, as already announced in May, we agreed to sell our motor vessel Marcos V for $50 million with delivery within October. Whilst we continue to have faith in the market, the price offered was simply too good to resist. The proceeds from the sale will thus eventually be used to further renew the fleet with younger vessels. Also at the start of June, we were able to charter our motor vessel Emmanuel P for 3 years at a highly profitable level of $38,000 per day. On the operations side, there were certain planned repairs for motor vessel Evridiki G and motor vessel EM Corfu, which resulted in off-hire periods of approximately 12.5 and 10 days, respectively. This upgrading work was deemed necessary for our 2 elder vessels to be able to seamlessly perform the very lucrative charters that we agreed upon during Q1. The fleet experienced no other idle periods or commercial off-hire during the quarter. Please turn to Slide 5. Here, you can see that the company has a fleet of 22 vessels, including 15 feeder container ships and 7 intermediate container ships with a cargo capacity of approximately 67,000 TEU and an average age below 13 years. As already disclosed, we expect the delivery of our 2 intermediate containership newbuildings in the third and fourth quarter of 2027, each with a capacity of 4,300 TEU, which will further increase the size and reduce the average age of our fleet. Please turn to Slide 6 for a further update on our fleet employment. We continue to benefit from the strong forward coverage we have achieved. For 2025, very close to 100% of the company's available days have already been secured at an average rate of approximately $28,000 per day. Looking ahead into 2026, approximately 67% of our available days have been fixed at an even higher average rate of $31,600 per day. As can be seen on the chart, we only have one vessel opening up for the charter within the year, and we are optimistic that this will be affected at a very satisfactory rate too. Moving on to Slide 8. We go over the market highlights in general for the second quarter of 2025. In the second quarter of 2025, 1- year time charter rates continued to strengthen during the quarter, supported by limited vessel availability and sustained demand, particularly in the smaller segments. In the feeder segment, rates rose by 8% in the second quarter of 2025 compared to the first. Market activity was primarily concentrated on contract extensions that were concluded at or above prior benchmarks, a trend that carried over into July and has continued through the first weeks of August. New contracts remain fairly limited, primarily due to lack of vessels. As we move through the second half of 2025, the operating environment remains complex and volatile. Geopolitical tensions and ongoing conflicts continue to disrupt trade patterns while protectionist measures may create further inefficiencies. These dynamics have reshaped global flows and the level of uncertainty remains elevated. Consequently, forecasting the market is indeed particularly challenging. Average secondhand price index rose by about 4% in the second quarter of 2025 compared to the first, supported by limited vessel supply and ongoing competition among buyers looking to expand their fleet. The newbuilding price index remained stable in the second quarter. Demand for newbuildings remains firm despite heightened market uncertainty stemming from the geopolitical tensions and the threat of even more tariffs. Notably, Korean and Japanese shipyards have begun to command higher pricing relative to their Chinese counterparts, probably due to U.S. trade measures and fees recently imposed on Chinese shipyard. Meanwhile, the idle fleet, excluding vessels under repair has continued to shrink, standing now at a negligible 150,000 TEU as of the end of July, representing just 0.5% of the global fleet. This marks a significant decline from the peak of 850,000 million TEU that was observed in February 2023. In parallel with the strong market, recycling activity also remains subdued with just 8 vessels totaling 4,000 TEU sent for demolition year-to-date. Scrap prices have eased slightly to $430 per lightweight ton as of August 8, 2025 in parallel with lower steel prices generally. And last, the global containership fleet has already expanded by 4.1% year-to-date. Please turn to Slide 9 for our broader market overview, focusing on the development of 6 to 12 months time charter rates over the past 10 years. As illustrated in the graphs on this slide, containership charter rates extended the growth trajectory through the second quarter of 2025, standing comfortably above the 10-year average median rates, underpinned by constrained vessel availability and sustained demand strength across all segments. Please turn to Slide 10. The IMF July 2025 update presents a slightly more resilient global economic outlook than the previous report together with global trade developments continuing to dominate the forecast development. The global economy continues to exhibit stable yet underwhelming growth. Global GDP growth is projected at 3% for 2025 and 3.1% for 2026 with the 2025 and 2026 projections revised upwards by 0.2% and 0.1%, respectively, compared to the April 2025 reference forecast. At these levels, the forecasts are below the 2024 outcome of 3.3% global GDP growth and the pre-pandemic historical average of 3.7%. Global policy remains highly uncertain. Trumps' new tariffs took effect on Tuesday, August 7, with higher rates for most U.S. trading partners, but some are still to be decided upon. Taken all together, these tariffs have pushed the average U.S. tariff rate to 15.2% according to Bloomberg Economics, well above the 2.3% last year and the highest -- and this is the highest level since World War II. The short-term impact of this change, however, will probably not be huge. The United States economy is projected to grow by 1.9% in 2025 and accelerate slightly to 2% in 2026 according to the IMF. U.S. growth forecast were revised upwards due to the easing trade tensions, improved financial conditions, the weaker dollar and the recent tax incentives aimed at stimulating business investment and consumer spending. In Europe, GDP accelerated driven by investment and net exports. Growth in the area is now predicted at 1% for 2025, up 0.2 percentage points from April projections. However, many European countries continue to face subdued domestic demand, manufacturing weakness and the lingering effects of the energy shock. Global inflation is expected to continue declining with headline inflation projected to fall to 4.2% in 2025 and 3.6% in 2026. In the euro area, inflation has gone down significantly. But in the U.S., it is still elevated as unemployment rate remains low. Emerging markets remain the primary drivers of global growth. India, for example, is forecast to expand by 6.4% in both 2025 and 2026, fueled by strong investment, robust agriculture and a dynamic services sector. The emerging 5 countries are also projected to post healthy growth. Also in China, growth has been revised upwards, driven by stronger-than-expected economic performance in the first half of the year, longer-than-anticipated tariffs between the U.S. and China at least today and the positive impact of fiscal stimulus reforms aimed at clearing local government arrears, which have all boosted domestic demand. Turning to the containership demand outlook. Clarkson's latest estimates as of July 2025 project container trade to grow by 2.7% in 2025. This upward revision reflects the assumption that the Red Sea disruptions will persist in the near term, resulting in longer voyage distances and increased ton mile demand. For 2026, Clarkson assumes fading of these effects, projecting a contraction of 3%. Should rerouted volumes return to the Suez Canal, voyage distances will shorten despite underlying cargo volumes remaining relatively stable. Turning on to Slide 11, you can see the total fleet age profile and containership order book. The containership fleet is relatively young with most vessels under 15 years old and only 12% of the fleet over 20 years old. Delivery as a percentage of total fleet stands at 7% for 2025, 5% for 2026, 7.5% for 2027 and 13% for 2028 onwards. As of August 8, 2025, the order book stands at 30.7% of the existing fleet, reflecting the ongoing wave of newbuilding activity across the sector. Turning on to Slide 12, however, we take a look over the fleet age profile and order book for ships in the 1,000 to 3,000 TEU range only, the sizes we mostly operate in. The order book here stands at just 5.4% as of August 2025, a completely different picture as you can see in the overall order book. According to Clarksons, newbuilding deliveries for feeder containerships are expected to remain limited over the coming years. In 2025, deliveries in this segment are projected to amount to 2.12% of the total fleet only. This already modest delivery schedule is expected to slow further to 1.5% in 2026, followed by 2.5% in 2027. A similar positive pattern also holds for vessels in the 3,000 to 6,000 TEU range. Now let's move to Slide 13, which shows the different supply fundamentals across the various containership sizes. As you can clearly see, the global order book remains heavily concentrated on the large vessels servicing main lane routes with significant capacity growth expected there. However, feeder and intermediate vessels, which are essential for regional distribution, face a very different supply outlook. Their order books are extremely limited and the existing fleet is relatively old with a large percentage of vessels over 20 years of age. These aging units are prime scrapping candidates in the softening market, particularly as environmental regulations tighten. As a result, it is quite possible that the fleet capacity for feeder and intermediate containerships will actually decline even as the overall containership fleet continues to grow. This evolving supply backdrop supports a structurally tight market in our operating segments with favorable implications for vessel utilization and charter rates. Turning on to Slide 14. For the remainder of 2025, the rerouting away from the Red Sea is the major factor affecting the market. The other factor that may also have a significant impact, as already said during the year, is, of course, the U.S. administration's packages that mostly took effect last week, but we still have things to see there. Following two attacks on cargo ships in the Red Sea in early July by Yemen's Houthi rebels fears of further escalation have delayed any meaningful return to the Suez route. As a result, a revised assumption is that the routing persist through the end of 2025 with the first possible reversal sometime in 2026. With the implementation of the new U.S. tariffs following further negotiation with key trading partners ranging from 10% to 50% depending on product, environment trade flows could be disrupted further. At the moment, we expect the impact of global GDP and demand to remain relatively muted though. Against this backdrop, we therefore anticipate time charter rates to remain exceptionally strong for the remainder of 2025. Looking into 2026, market conditions will depend primarily on the status of geopolitical and economic events. Should the passage through the Suez Canal remain restricted, we expect the market to hold firm with only a modest decline. However, a faster-than-expected reopening could prompt a more pronounced market correction. Meanwhile, containership ordering activity continues to accelerate, further inflating an already elevated order book and posing longer- term supply challenges from 2027 onwards. Energy transition is gaining more and more traction in the sector with a clear industry shift towards alternative fuels and in particular, the medium-term solution of LNG. Most newbuilding orders encompass at least an LNG-ready option. That said, technical and economic headwinds are expected to keep the pace of adoption slow. Eco-efficient vessels are, of course, increasingly commanding a charter rate premium as charters and regulators intensify the focus on emissions compliance and sustainable transport solutions. The recent shift in U.S. energy policy under the current administration marked by a more fossil fuel stance is likely to delay but definitely not derail the overall transition. Now please turn to Slide 15. The left-hand side slide graph shows the 1-year time charter rate for 2,500 TEU containerships over the past 10 years. As of August 8, the 1-year time charter rate for these containerships stood at just about $35,000 a day. While below its recent peak, this level remains exceptionally high and is well above both the historical average and median. In parallel, newbuilding and secondhand vessel prices have also risen over the past year and remain significantly above their long-term historical averages too. We have a significant amount of free liquidity, which we are constantly evaluating how to best use. We are returning part of this to our shareholders through our dividend and our stock repurchase plan. We are committed to offering our shareholders a good dividend through both good and bad times. And therefore, we are maintaining necessary reserves to cater for a possible downturn. At the same time, we are keeping most of our costs available to help grow the company further. In this environment of extremely high prices and similarly high charter rates, we are not thinking of buying secondhand vessels unless we can simultaneously secure charter rates that will bring the residual value of the vessel at the end of the charter to a medium level. This is proving difficult to find though. Newbuilding prices have also increased substantially during the last 5 years. However, we feel this is a structural increase that will be very difficult to reverse. Prices will probably not grow at least significantly. We are therefore seriously considering options along this front. And with that, I will pass the floor to our CFO, Tasos Aslidis, to go over our financial highlights in further detail.
