Euroseas Ltd.

Your conference will begin shortly.

Thank you for standing by, ladies and gentlemen, and welcome to the Euroseas conference call on the first quarter 2020 financial results. We have with us today Mr. Pittas, Chairman and Chief Executive Officer, and Mr. Elisilidis, Chief Financial Officer of the company. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session, At which time, if you wish to ask a question, you will need to press star and 1 on your telephone keypad and wait for your name to be announced. I must advise you that this conference is being recorded today, Wednesday 27 May 2020. Please be reminded that the company announced its results with a press release that has been publicly distributed. Before passing the floor to Mr Pittas, I would like to remind everyone that in today's presentation and conference call, Euroseas will be making forward-looking statements. These statements are within the meaning of the Federal Securities Laws. The statements in today's conference call are not historical facts, including, among other things, the expected financial performance of Euroseas' business, Euroseas' ability to pursue growth opportunities, Euroseas' expectations or objectives regarding future and market charter rate expectations, and in particular, the effects of COVID-19, on the financial condition and operations of Euroseas and the container industry in general may be forward-looking statements as such as defined in Section 21E of the Securities Exchange Act of 1934 as amended. 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 realised. I kindly draw your attention to slide 2 of the webcast presentation, which has the forward-looking statement, and the same statement was also included in the press release. Please take a moment to go through the whole statement and read it. And I would now like to half-pass the floor over to Mr. Pittard. Thank you, sir. Please go ahead.

Good morning, ladies and gentlemen, and thank you all for joining us today for our scheduled conference call. Together with me is Stasios Aslidis, our Chief Financial Officer. The purpose of today's call is to discuss our financial results for the three-month period ended March 31st, 2020. Let's now turn to slide 3 to see our income statement highlights. For the first quarter, total net revenues were $15.4 million, net income was $2 million, and net income attributable to common shareholders After a $160,000 dividend on Series B preferred shares was $1.8 million or $0.32 gain per share basic and diluted. Adjusted net income attributable to common shareholders for the period was $1 million or $0.17 per share basic and diluted. Adjusted EBITDA was $4.1 million. Please turn to slide 4 for details of some of our recent developments. During the second half of 2019, the company acquired 8 vessels in total with an average age of 12.5 years and total capacity of 25,600 TEU, thus increasing the fleet by more than 70% in number of vessels and more than 100% in terms of total TEU capacity. In addition to the various routine operations, there were two noteworthy events related to our fleet insofar in 2020. First, we sold the motor vessel Manolis P for scrap with targeted delivery period in the first half of April 2020. Unfortunately, the sale was not completed due to the closure of the scrap yards related to COVID-19 lockdowns. We are in dispute with the buyers over the sale which is being dealt through arbitration in London. The vessel will however be sold for scrap when the scrapyards reopen, probably to a new buyer. Secondly, as already reported in January 2020, the motor vessel EM Inousses suffered an engine room fire, luckily with no effect to our crew. This has been temporarily repaired and we have decided to scrap the vessel a few months earlier than initially envisioned as soon as scrapyards reopen in order to avoid costly repairs. The COVID-19 pandemic has come center stage in the world scene since March 2020 with the economic effects influencing world trade and demand for shipping. This slowdown is expected to result in reduced charter rates and earnings in the remaining of 2020. In that respect, we have started discussions with our banks to defer some of our 2020 loan repayments to ensure that we have sufficient liquidity in the near term. ASOS will provide you more information later on. Please turn to slide 5, where you can see our current fleet profile after the latest additions. We now have 19 vessels which include 14 feeder container ships and 5 intermediate container carriers with 661,000 deadweight tons and 51,000 TEU capacity of average weight and average age by TEU of 16.5 years. As mentioned earlier, Manolis P. and E.M. Inoussis are in the process of being scrapped as soon as scrapyards open. Let's turn to slide 6 for our chartering, operational and dry docking highlights. Up to now, we have been able to renew most of the charters that expired over the first months of the year, at rates generally a little bit lower than their last charters, and without facing idle times, except the Akinada Bridge, the Ninos and the Hydra, which each faced about 15 days of idling. Only the EM's patches, which opened up to early May, has not yet found new employment. I will not go through the complete list of new charters achieved, but you can see them all on slide 6. Slide 7 shows our vessel employment in graphical form as well. As of May 25th, we have about 57% coverage for the remainder of 2020 based on the minimum durations. Please turn to slide 8. Over the last five years, our operational and fleet utilization has been in excess of 98.9%. Eurosys has an outstanding safety and environmental record, but at the same time, the company is managing to keep costs low despite running an older fleet than the other listed companies. For the first quarter of 2020, Operational fleet utilization was 96.2%. Practically all the drawback is attributed to the fire on the Inousis. The commercial fleet utilization rate in the first quarter of 2020 was 99%. The graph on the page compares daily costs excluding dry docking since 2011 with our peers. Overall, our costs achieved are among the lowest of the public shipping companies. Let's turn to slide 10 to discuss the container ship market highlights of the first quarter. Time charter rates in the first quarter for feeder and intermediate size vessels ranging from 1,000 to 5,600 TEU vessels drew a negative picture as shown by the context index. The 1,700 to 42 TEU and a few hundred DEU sizes fell at about 10%. The bigger ships also fell but a bit less. April and May figures are even lower and the number of idling vessels is rising. According to Clarkson's, the 1,700 DEU geared vessel fell from an average of 8,500 in Q4 to 7,770 in Q1 and currently stands at 6,200. The 2,500 TEU geared vessel fell from an average of 10,130 in Q4 to 9,370 in Q1 and currently stands at around $7,500 per day. Whilst the 4,400 TEU gearless vessel fell from an average of 13,800 in Q4 to 12,900 in Q1, and currently stands at 8,250. Average second-hand prices for older than 20-year-old vessels remained around their now-dropping, though, scrap prices. However, for younger vessels of about 5 to 15 years old, there was a drop circa 15%. The inactive container ship fleet serves to a record of 524 vessels totaling 2.6 million TEU as of May 11, according to a recent Tradewinds article. This includes idle due to scrubber retrofitting, which of course is mostly larger vessels and is about 700,000 TEU total. Scrapping remained at the same levels as the latter part of 2019, which is very low for the current market. Only about 40,000 CEU are scrapped in 2020 so far. Due to the lockdown of scrapyards, worldwide vessels can't be scrapped currently and any quoted prices are 20-25% lower than the previous prices. The fleet has grown by 0.6% in 2020 so far, without, of course, accounting for idle vessels reactivations or idling. Please turn to slide 11. Due to COVID-19, the IMF-projected world GDP growth in 2020 is revised downwards from 3.3% positive growth to minus 3%, with reductions stemming from the USA, China, India, and the ASEAN 5 economies mostly. India was also reduced this quarter from 5.8% the IMF predicted three months earlier to 1.9% growth predicted today. For 2021, global GDP growth rebounds to 5.8% as per the IMF, as still their base case scenario is for a rapid global recovery. Four major global economies are expected to rebound strongly in 2021, with the US and the Eurozone rebounding by 4.7%, India by 7.4%, and China by 9.2%. In terms of demand for containerized trade, demand measured in TEU per mile is expected by Clarkson's to have a sharp drop at minus 10.3% in 2020. while a high growth rate of 8.9% is expected to return in 2021 owing to the rise of the global economy. Should be noted that rate and growth projections currently made will probably be revised as COVID-19 develops but also due to the uncertainty of the geopolitical situation. Therefore, market development projections are even harder than usually to make. Please turn to slide 12 to review the container shipage profile and order book delivery schedule. As you can see on the container shipage profile chart on the left side of the slide, we have a young fleet with a mere 6% of ships being over 20 years old only. This, however, is concentrated in the smaller size classes where we operate. On the right side, The chart shows the delivery schedule of the current container ship order book, which is expressed as a percentage of the fleet. The circled figures for the years 2017 to 2019 show the actual fleet growth after taking into account scrapping, cancellations and slippages, whilst the red circled figures for 2020 to 2022 show the order book before any scrapping and slippages. Currently, the container ship order book stands at 10% of the fleet, a figure which is the lowest observed in more than 20 years. This low level of order book provides a source of optimism for a quick recovery of the rate if trade demand recovers as supply side pressures will be at minimal levels. Please turn on to slide 13 where we discuss our outlook summary. The disruption of economic activity and seaborn trade caused by the unprecedented worldwide lockdown, as well as the still evolving pandemic, render any forecast a very ambitious exercise surrounded with a high degree of uncertainty. As discussed, initial estimates from Clarkson's to quantify the effects of the pandemic on containerized trade indicate a sharp drop in demand in 2020 of 10%, followed by a sharp recovery in 2021 of 9%, similar to the way economies reacted during the 2008-2009 financial crisis. Therefore, we expect a very weak 2020 and a strongly strengthening 2021 and 2022. Hoping to have been through the toughest part of the pandemic's effect in the first half of 2020, We still might not expect to see any significant gains during the summer, but markets could see meaningful improvements by year-end. For the following few months, it will be difficult to charter vessels that are delivered by the charters and the owners. The best hope is to extend, if possible, with existing charters for whatever periods are available at somewhat lower rates in order to avoid idling. The order book, as a percentage of the fleet, is the lowest of the last 20 plus years, indicating limited supply growth over the next 2-3 years. Still, a significant percentage of it is to be delivered in 2020, though some of it will spill into 2021, plus the return of quite a few vessels, mainly larger ones that are in shipyards retrofitting scrubbers, will dampen the effect of any market recovery, as the effects of COVID-19 hopefully retreat towards the latter part of the year. The order book for 2021 onwards is luckily quite low, and since owners do not yet know what the optimal fuel for the not-too-distant future will be, they are reluctant to place new orders, so the second half of 2021 and the whole of 2022 may prove to be boom periods if global demand picks up as generally expected. Let's turn to slide 14. The left side of the slide shows the evolution of the one-year time charter rates for containers of 2,500 EU since 2000. Since the financial crisis of 2008, rates stayed rather depressed with three spikes within the $5,500 to $15,000 per day range. Currently, we see charter rates hovering at $7,500 per day. The right-hand side of the slide shows vessel values in relation to historical prices since 2011. As you can see, container ship values are still below the median historical values and of course significantly lower than historical average levels as well. I will now pass the floor to our CFO Tasos Aslidis to go over our financial highlights.