Euroseas Ltd.

Thank you for standing by, ladies and gentlemen, and welcome to the conference call on the first quarter 2022 financial results. We have with us today Mr. Aristides Pitas, Chairman and Chief Executive Officer, and Mr. Tassos Aslitis, Chief Financial Officer of the company. At this time, all participants are in 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, please press star 1 on your telephone keypad and wait for the automated message advising your line is open. I must advise you that this conference is being recorded today. Please be reminded that the company announced its result with a press release that has been publicly distributed. Before passing the floor to Mr. Pitas, I would like to remind everyone that in today's presentation and conference call, your tribe 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 risk and uncertainties that may result in such expectations not being realized. I kindly draw your attention to slide two of the webcast presentation, which has the full forward-looking statement And the same statement was also included in the press release. Please take a moment to go through the full statement and read it. I would now like to pass the floor over to Mr. Pitas. Thank you, sir, and 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 Tasos 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, 2022. Let's turn to slide three. Our income statement highlights are shown here. For the first quarter of 2022, we reported total net revenues of $45.4 million and a net income of $29.9 million. Adjusted net income attributable to common shareholders was $26.8 million, or $3.70 per share diluted. Adjusted EBITDA for the period stood at $31.1 million. Our CFO, Tasos Aslidis, will go over the financial highlights in more detail later in the presentation. We are indeed very pleased with the company's increased profitability, which is of course the result of the extremely strong Charter H.R. Vessels record during the first quarter of 2022. In this positive environment and with robust earnings visibility well into 2024, we believe our stock should be trading at much higher levels, given the value of these contracted revenues and the net asset value of the company. We believe these factors combined create captivating opportunities for us. Therefore, the company's board of directors approved a share repurchase program for up to a total of $20 million of the company's common stock to be used at management's discretion. The board will review the program after a period of 12 months. Share repurchases will be made from time to time from cash in open market transactions at prevailing market prices or in privately negotiated transactions. The timing and amount of purchases under the program will be determined by management based upon market conditions and other factors. The program does not require the company to purchase any specific number or amount of shares and may be suspended or reinstated at any time in the company's discretion and without notice. At the same time, our increased profitability and charter coverage has allowed us to reinstate our common stock dividend plan, which ran consecutively from 2005 until 2013, but had to be paused due to the negative markets experienced in the last decade. This plan rewards our shareholders without having to hold back our growth strategy as we are paying out just a small part of our contracted earnings. In this respect, our Board of Directors has declared a quarterly dividend of 50 cents per share for the first quarter of 2022 payable on or about June 16, 2022 to shareholders of record on June 9, Despite the short-term rewards we have initiated for our shareholders, we do remain committed to further growth of the company. We therefore continue to examine investment and other opportunities, and we expect to remain a significant participant in the feeder container ship market as we grow our fleet. Please turn to slide 4, where we discuss our recent chartering and operational developments. Motovessel Aegean Express charter was extended for approximately 36 to 39 months at $41,000 per day beginning March 31. Motovessel Synergy Auckland was fixed for a single voyage brief idle period as a result of the loss of the short-term charter of $130,000 per day that was to be performed before a four-year charter we had concluded at $42,000 per day. The charter subsequently missed its delivery date. Therefore, this short-term charter was extended by approximately 30 days in April at $180,000 a day. before it started its new four-year charter, which it is currently doing. We are also pleased with the fixture of our first two new building vessels ahead of the delivery date at $48,000 per day for a minimum period of 36 months each. Motovessel Gregos' new charter will commence in March 2023 upon its delivery, while Motovessel Steratakis' new charter will commence in June 2023 upon the delivery of that vessel too. Regarding repairs and dry docking, EM Corfu underwent dry dock during the first quarter, while the Echinada Bridge incurred some repairs after having lost some containers at high seas. Furthermore, motor vessel Synergy Auckland incurred about five days of commercial off-hire in February 22, as discussed above. Please turn to slide 5, where we discuss our fleet's growth strategy. Adhering to our plan to renew our fleet and expand our footprint in the feeder sector, we continue focusing on the most commercially demanded vessel sizes. In January 2022, we placed orders for two additional EcoDesign fuel-efficient 2,800 TEU new building container ships at a combined price of about $85 million. And in May 2022, we exercised our option to proceed with the construction of two more sister vessels for a combined consideration of about $86 million. All four vessels will be constructed at Hyundai Meepo Dockyard in South Korea. The vessels are sister ships of a pair of vessels which were ordered in June 2021 and, as I said, was just chartered out. The four new orders are expected to be delivered between the fourth quarter of 2023 and the fourth quarter of 2024. In addition to this, we placed orders for three new building vessels with a carrying capacity of 1,800 TEU each, which will also be constructed at Hyundai Meepo, for a total consideration of approximately $102 million. The vessels are expected to be delivered during the first half of 2024, one in the first and two in the second quarter of the year. At the same time, we also scanned the market for second-hand vessels with long-term time charters in place at attractive acquisition prices, bringing the cost basis of the vessel below historical average levels at the end of the charter. As previously announced, at the beginning of May, we agreed to acquire MV Emmanuel P, ex-Hispan Melbourne, which has a charter rate of $19,000 per day until March 2025, and MV Rena P, ex-Hispan Manila, which has a charter rate of $20,250 per day until April 2025. context index, with a floor of $13,000 and a ceiling of $21,000 per day until February 2025. Both intermediate-sized container vessels have a capacity of 4,250 TEU each and were built in 2005 and 2007, respectively. The vessels were acquired for a combined price of $37 million. I am happy to say that MV Emmanuel P was delivered to the company today in the morning, whilst MV Rena P is expected to be delivered sometime within June 2022. Both acquisitions have been initially financed with the company's own funds. Please turn to slide 6 where you can see our current fleet profile. Eurasia's current fleet is comprised of 18 vessels. Actually, we should say 17 vessels, as the RENAPI will be delivered to us in June. Anyway, of these 18 vessels, 10 are feeder container ships and eight intermediate container carriers. Eurasia's 18 container ships will have a carrying capacity of about 59,000 TEU and an average age of about 17 years. Flight 7 shows the nine feeder container ship new buildings with a total carrying capacity of 22,200 TEU that are expected to be delivered between 2023 and 2024. After the delivery of the new building vessels, Eurosis fleet will consist of 27 vessels with a total carrying capacity of about 81,000 TEU. Slide 8 shows our vessel employment chart. As you may see, we have covered 97% of our capacity in 2022, approximately 78% of our capacity in 2023, and almost 55% in 2024. Let's now turn to slide 10 to review how the market has developed in the last decade. Rates charter rates were low across all segments until mid-2020, after the onset of the pandemic. Since then, charter rates have improved about six times, posting 10-year historical highs. Despite the short-lived retreat in container rates that was registered during November and December of 2021, rates continued to climb to new highs in the first quarter of 2022. Although we've seen a slight correction in the last weeks for the feeder sizes, we expect market fundamentals to be favorable throughout the year. Please turn to slide 11 to go over some other market highlights. As we've mentioned, time shutter rates across all segments have skyrocketed over the past 12 months and have reached all-time highs. Alongside the increased time charter market, prices for second-hand vessels have also increased, with the average second-hand price index up about 17% in Q1-22 over Q4-21. Price gains were most apparent in the feeder segments, with a guideline price over 2,750 TEU 10-year-old vessels rising approximately 180% year-over-year, to $56 million. During the last couple of weeks, we have seen, though, some softer deals being concluded in the smaller feeder sector. During the first quarter, the new building index increased by about 2.4%. The sentiment of the new building market continues to follow its upward trend, which is also reflected in the current container ship prices, which are holding at five-year highs. The idle container ship fleet, as of May 9, stands at about 270,000 TEU, or 0.7% of the fleet, and has remained around those levels, lowest levels, in the last year. However, due to lockdowns in China, the trend seems to be retreating a little bit in the last few weeks. When China reopens, these idle vessels will also be, of course, probably reactivated. There have been no demolitions to date in 2022. The capacity of container ships to be scrapped is expected to be approximately 34,000 TEU by Clarksons. Scrapping price has remained high so far during the year and stands at around $660 per lightweight ton as of May 2022. Overall, the fleet has grown by about 1.1% year-to-date, without, of course, accounting for the idle reactivations. As it stands, approximately 80% of the capacity ordered so far in 2022 has been alternative fuel capable, mainly LNG dual fuel, while in 2021 just 22% of the capacity contracted was with alternative fuel capable. Please turn to slide 12. Global growth is expected to slow significantly in 2022, largely as a consequence of the ongoing conflict between Ukraine and Russia, increased inflation pressures and the continuing lockdowns in China. In its latest report, the IMF lowered its previous global GDP estimates from 4.4% growth to 3.6%. due to the sanctions, as well as European countries' decision to scale back energy imports. Shorter-than-expected slowdown in China remains a key risk to growth and is affecting global supply chains. More stimulus measures are likely to be employed in order to speed economic activity. But the strength of any rebound is uncertain and will largely depend on the scale of future COVID-related outbreaks and lockdowns. The IMF has also cut U.S. growth to 3.7% for 2022 and 2.3% for 2023, down from its January projections of 4% and 2.6% respectively for the U.S. Prospects for emerging markets and developing economies are also generally for lower growth in 2022 than in 2021. From the developed economies, only Japan and the ASEAN 5 are expected to do better than 2021. Looking at the containerized trade, and according to Clarkson's research, demand is expected to grow by 3.2% in 2022, For 2023, we expect containerized trade demand to grow at a moderate pace of 3.5%. Rate and growth projections are being continuously revised as the effects of the lockdowns in China and geopolitical tensions between Russia and Ukraine on world growth and trade are being continuously reassessed. Please turn to slide 13 to see the container ship age profile and delivery schedule. As you can see in the container ship age profile chart located on the left side of the slide, we have a young fleet with a mere 8% of ships being over 20 years old. However, the older vessels are mainly concentrated in the smaller classes in which our ships operate. The right side chart shows the delivery schedule of the current container ship order book, which is expressed as a percentage of the fleet. reflects the anticipated fleet growth before any scrapping and slippages. Currently, the total container ship order book stands at 26.4% of the fleet, and the majority of the deliveries are scheduled for the second half of 2024 onwards. Please turn to slide 14 where we discuss our outlook summary for the container ship market. As previously mentioned, the Ukraine-Russia conflict has contributed to this rising uncertainty and inflation, while continued Chinese lockdowns are causing delays in the easing of global supply bottlenecks. Supply and demand analysis still suggests a fair market continuing in 2022. The short to medium-term outlook for the container sector remains positive, with port congestion and trade disruptions likely to continue to provide support throughout the year, alongside a moderate fleet growth of 4%. In addition, the Chinese lockdowns are currently affecting local production levels, which could have material implications if they persist, but could also transform to a rapid recovery once the lockdowns end. These logistical bottlenecks are expected to remain in the near term. Longer term, though, fundamentals are harder to predict and will depend on the interplay of, first, what demand for vessels will be once transportation system disruptions ease. Second, the fallout of the Ukraine-Russia conflict and its effect on world economic growth and containerized trade. it will overtake demand growth. And lastly, the effect of new environmental regulations, which will probably result in further slow steaming by 2023, 2024, and effectively removing capacity from the market. Let's move to slide 15. The left side of the slide shows the evolution of one-year time charter rates for containers with the capacity of According to Clarkson's, as of the end of last week, the one-year daily time charter rate for a 2,500 TEU container ship stood at $76,000 per day. The right-hand side of the slide shows the historical price range for a 10-year-old container ship with a capacity of 2,500 TEU, which has a current price of $56 million and is the highest of all the last decade. There is no doubt that at some point charter rates and prices have to correct, as such high shipping costs threaten to derail the world order of globalization. The astronomically high margins of today will no doubt give way to more rational markets once enough new vessels and positions the company accordingly to take advantage of the opportunities presented by the current market, but also be prepared for the correction that will sometime come. The company will continue growing when the right opportunities are spotted, but will maintain a strong balance sheet throughout to weather any storm that may come. And with that, I will now pass the floor to our CFO, Tassos Aslidis, to go over our financial highlights in further detail.

Thank you very much, Aristides. Good morning from me as well, ladies and gentlemen. As usual, I will now take you through the next five slides of our presentation and give you an overview of our financial highlights for the first quarter of 2022 and compare the results to the same period of last year. For that, let's turn to slide 17. For the first quarter of 2022, Eurosys reported total net revenues of 45.4 million, representing a 217% increase over total net revenues of 14.3 million during the first quarter of last year. The company reported a net income and a net income attributable to common shareholders for the period of 29.9 million as compared to a net income of 3.8 million and an net income attributable to common shareholders of 3.6 million for the first quarter of 2021. Interest and other financing costs for the first quarter of 2022 amounted to about 1 million compared to 0.7 million for the same period of last year. This increase is generally due to the increased amount of debt we carry and the increase in the weighted average LIBOR rate that we paid in the current period compared to last year. Adjusted EBITDA for the first quarter of 2022 was 31.1 million compared to 5.6 million for the same period in 2021, representing a 455% increase. Please see the press release we issued yesterday for the adjusted EBITDA reconciliation to our net income. Basic and diluted earnings per share for the first quarter of 2022 were $4.15 and $4.13 respectively, calculated on 7.2 million basic and 7.3 million diluted weighted average number of shares outstanding, compared to basic and diluted earnings per share of $0.53 per share, for the first quarter of 2021, calculated on about 6.7 million basic and diluted weighted average number of shares outstanding. Excluding the effect on the income attributable to common shareholders for the quarter of the unrealized gain on derivatives, the amortization of below-market time charters acquired, and the depreciations charged due to the increased value of the vessel acquired with the low market time charter. The result for the quarter would have been $3.71 basic and $3.70 diluted, compared to adjusted earnings of $0.45 per share basic and diluted for the first quarter of last year. during a period during which we excluded unrealized gain in derivatives and the loss on the sale of a vessel. Usually, security analysts do not include the above items in the published estimates of earnings per share. That's why we present our earnings in that fashion. Let's now move to slide 18, to review our fleet performance. Again, as usual, we will start our review by looking first at our utilization rates for the first quarter of 2022 and compare them to the first quarter of last year. Our fleet utilization rates are broken down into commercial and operational. During the first quarter of 2022, our commercial utilization rate was 99.6%, while our operational utilization rate was 99.5%, compared to 100% commercial and 96.7% operational for the first quarter of last year. On average, 16 vessels were owned and operated during the first quarter of 2022, earning an average Time Charger equivalent rate of $33,986 per day, compared to 14 vessels in the same period of last year, earning on average $12,134 per day. Our total operating expenses, including management fees, general and administrative expenses, but excluding diverting costs, averaged $7,329 per vessel per day during the first quarter of this year, compared to $6,914 per vessel per day for the first quarter of 2021. If we move further down in this table, we can see the cash flow breakeven rate for the first quarter of 2022, which also takes into account, in addition to the above, interest expenses, dry-torten expenses, and loan repayments, but excludes balloon repayments. and for the first quarter of 2021 also includes preferred dividend payments. Thus, during the first quarter of 2022, our daily cash flow breakeven rate was $14,057 per vessel per day, compared to $9,330 per vessel per day for the same period of last year, with a difference primarily due to increased loan repayments and dry docking expenses. Let's now move to slide 19. You should be familiar with this slide by now, as we've used it since this time of last year. This slide provides our shareholders and investors with a tool to assess the earnings potential of our fleet in the coming periods. The table shown in this slide has two parts. The first part refers to our already in place contracts. The table shows the available days for hire of our fleet in each period, and after making assumptions for the dry-dolting days expected, and also shows the number of contracted days, as well as the difference of the two, what we call the remaining open days of our fleet. The table also shows the percentage covers and the average contracted rate in each period. By making an assumption for the operating and G&A expenses and the dry-dieting costs, we can estimate, first, the EBITDA contribution of the contracted portion of our fleet. To complete our EBITDA calculation for the entire fleet, we need to make an assumption about the average rate to be earned by our open days. Here one could make his or her own assumptions. Indicatively, If we assume that open days in 2022, 2023, and 2024 would earn another rate equal to that of the contracted dates in each period, we would have the EBITDA estimates shown at the bottom of the table. Furthermore, by knowing our open days in each period, we can easily calculate the sensitivity of our EBITDA to chart rate changes. Of course, as our contract coverage is very high, especially for 2022, which is essentially 100%, and 2023, our EBITDA dependence to market rate is minimal. Taken to the extreme, it is worth noting that even if all our open days earn nothing, then our EBITDA for the next two years would still be over 125 million per year, and even for 2024 it would be over 105 million. Let's now move to slide 20 to review our debt profile. On the top part of this slide, we can see our scheduled current debt repayments over the next several years. Our loan repayment schedule without balloons for this year stands at about 27.4 million, with our debt repayments of the current debt, as I mentioned, going down over the next three years. We have various volume payments due in 2023, which we expect to routinely be able to refinance if chosen so. Please note that the shown debt profile does not include new debt that we expect to assume to finance our new building program. A quick note on this slide on the cost of our debt. This is related to the loans outstanding at the end of the last quarter. The average margin of our debt is about 3%, and assuming a LIBOR rate of 1.25%, our cost of our senior debt would be on average about 4.25%. If one includes the cost of our interest rate swaps, which are on average at about 1%, the overall cost is coming down a bit to about 4.17% for our existing debt. Looking at the bottom of this table, we can see our cash flow breakeven level expectation for the next 12 months in dollars per vessel per day. You can see that our loan repayments that we just reviewed over the next 12 months are to make a $4,094 per versa per day contribution to our cash flow breakeven level. If we make similar assumptions for the remaining components of our cash flow breakeven level, that is our operating expenses, G&A expenses, interest payments, and die-doting costs, we can come up with a cash flow breakeven leverage for the next 12 months of just around $13,061 per vessel per day. Let's now move to slide 21. This slide provides some highlights from our balance sheet, adjusted to reflect the market value for our fleet. As of March 31st, 2022, on a book value basis first, Our assets include cash and other assets of about 68.6 million, and the book value of our vessels, including advances for the new buildings and the acquisitions of the second-hand acquisitions, giving us a total book asset value of about 241.8 million. On the liability side, we had an outstanding bank debt of 112.1 million and other liabilities of about 22.6 million, resulting in a net book value of our shareholder's equity of about 107 million. However, the market value for our fleet is much higher than its book value. We estimate that our vessels are worth more than 520 million, inclusive for the appreciation of the value of venue building contracts and adjusted for the negative value of certain of our charters. Thus, on a market value basis, we can calculate the net asset value of our fleet to be around $470 million, or around $64 per share. Recently, our shares have been trading in the range between $24 and $29 per share, thus representing a significant discount to our net asset value per share and offering good appreciation potential for our shareholders and good investment opportunities for our investors. And with that, I would like to close my presentation and pass the floor back to Aristides to continue the discussion.

Thank you, Tasos. Let me now open the floor for any questions.

Thank you, sir. Before we open the line for questions, this conference is for your first quarter 2022 results. And if you wish to ask questions, please press the star one or telephone keypad and wait for the automated message advising your line is open. Please state your first and last name before you ask your question. And if you want to cancel your request, please press the star two. And we take our first question. Please go ahead. Your line is open.

Hi, thank you. Good day. Kate Sullivan from Maxim Group. Can we start just, can you provide more detail on your new bill chartering strategy after you book the RENA and the Grego's well ahead of delivery? Do you hope to replicate those types of contracts, those levels, with the next two 2,800 deliveries? And is setting the contract 10 months to 13 months well ahead of delivery a much longer timeline than historically, please?

Sure. It depends on the market. If we are able to do it at similar levels, we think these are great levels. But the next couple of ships comes up a little bit later than the first two, so we'll have to wait for a few months before we are able to move on. that we fixed. What will happen will really depend on the market if we're able to do these things going on for later.

Thank you. And you mentioned preparing for an eventual correction, rather. And I think before, you've talked about maintaining a lower capital ratio than historical, maybe about 30% based on NAV. Is that still what you may be looking at, or what other balance sheet approaches are you taking through the cycle?

Sure. We are repaying debt continuously. We will keep leverage contained. We do currently have the visibility on our earnings and our constructed earnings, which gives us a great assurance that we are very well covered for the following three years. so we don't have any fears for the next three years. And we want to take advantage of the opportunities that might appear to continue growing the company and rewarding the shareholders.

And just back on the new building strategy, if I may, might you take a staggered approach similar to what you have with your whole fleet before in terms of having a mix of shorter-term and longer-term contracts? like the three-year contracts you recently announced?

It's possible. It's possible. We always try to take care not to have all the ships opening up at the same time. It might be a poor time in the future if everything opens up at the same time. So we like the staggered, more conservative approach.

Okay.

Thank you. Have a great rest of the day. Thanks.

Thank you. We will take our next question. Please go ahead. Your line is open.

Good morning, Aristides. Good morning, Tasos. It's Poe Frat from Alliance Global Partners. Hi, Poe. Good morning. I had a couple follow-up questions on just the new builds. Can you highlight how much you spent in the first quarter on the new build program? and how much you're going to spend for the rest of the year. And then if you have numbers available for 2023 and 2024, that would be helpful.

I think in the first quarter of the year, we made the 10 percent payments for the first two vessels we ordered. And I think we're still in the process of making these initial payments.

None of our vessels have started being built yet, so the second payment will be made when the vessels start being built. I think, Paul, we can send you afterwards the full schedule of payments so that you have a clear picture. That would be really helpful.

And then, Aristides, on the dividend, you reinstated the dividend at 50 cents a quarter. Is that something that we should expect as far as a level over the next several quarters? Or how will you look at setting the dividend? Is it a set formula or a set amount?

No, we don't have anything set other than that we will be consistent and we will be paying dividends going forward. We were perhaps not one of the first companies to reinstate a dividend because we wanted to pay a dividend when we know that we can comfortably continue the whole process. process for the years to come. And we feel comfortable that, you know, with the next three years where we have visibility, we will be able to be paying a dividend. If that stays the same or increases, it's something that remains to be seen and decided on a case-by-case basis on the next board meetings that we're going to have.

Okay. And then when you look at the buyback program, you sort of address the price sensitivity. You know, it's very discretionary. Could you highlight, one, how quickly the stock buyback program could become active? And then secondly, could you highlight whether there'll be any quarterly blackout periods on the buyback?

I don't think there will be any blackout periods on the buyback. And I think the program will be ready to run extremely soon. Now, if we are going to implement and be buying stock and how much we will do will really depend on the market circumstances. Yeah, understood.

And then, Tasos, you talked about financing the new builds. Is there a target level, like 40%, 50%, that you'd be looking at financing the new builds to finance the delivery payment?

I think our main assumption and target is to finance about 60% of the contract price. So it might vary depending on the circumstance. For example, the first two vessels that we have already booked, long-term contracts, we might be able to increase that leverage. We haven't decided that yet, but we might be able to, and depending on the situation when the time comes to finance it, it might vary, but assuming a 60% average is a safe assumption.

Okay, that's helpful. And then, you know, if we could talk about the, you know, you talked about planning for a potential downturn, you know, because of maybe uncertainty on the demand side, but more importantly, you know, the expansion on the supply side. Your forward cover book is very high, but you do have like the Akhenaten Bridge coming up in 2022 in November, the Joanna in January of 23, and then three other ones in sort of the middle of 23. Can you talk about possibly rate expectations at this point in time, whether you're in active discussions on those renewals, just a flavor for whether you're seeing any of the potential weakness impacting discussions at this point in time.

We aren't really having any discussions currently, Paul. I think both owners like us and charters are having a little bit of a wait and see thinking at this point. And we are happy to wait a little bit more to see how things develop before... doing something.

Okay. And, you know, it's interesting that you, you know, you added on the dual fuel capability or the LNG fuel capability to your new build program. You know, the cost went up a little bit, but what drove that decision? Was it a customer driven decision or was it a corporate decision based on what you see the emission standards, you know,

It was mostly a defensive move, I would say, in case LNG does prove that it becomes the fuel of, you know, the short-term, future short-term, meaning about the next 20, 30 years. So we want to be able to transform the ships if needed. So it's more of a defensive move at this point. It's not that we are aggressively thinking that LNG will be the fuel of the future, but it might be.

At the same time, the upgrade of the engines to Tier 3 is also part of our commitment to our environmental and ESG strategy.

Okay, and then would you... You know, we will always adhere by the laws and the environmental demands that are made on us. We believe in that and we want to help in that way as much as we can.

And Looking at other potential fuels, like green ammonia and other things, would you need to make additional modifications to the engines to run on those type of fuels, or is that something you're in the position to be able to assess at this point in time?

Yes, it would be very difficult to make changes to burn another fuel, but I can tell you that it will be one of these new fuels, ammonia, hydrogen, etc. But it is still... many years away before it becomes commercially viable. LNG is commercially viable today. The other fuels are not. Great.

Thank you very much for your time.

Thanks a lot.

Thank you. And the next question. Your line is now open.

Is there a next question?

Hi, guys. This is James from Universal.

Hi. How are you?

All right. Good. How's it going? All right. So just a couple of quick ones from me. One is on the dividend policy. What made you decide on $2?

Right.

What was the calculation to get to the $2 annual dividend?

We thought, I mean, a $2 dividend is a yield which is currently higher than most of the competition of more than 7% of where we were. We feel it's a decent level of dividend to give, and now it's a nice round figure, too.

Okay. If I'm following this right, this is a fixed dividend, this is not a variable dividend, correct?

The dividend will be discussed on the board level at each quarter. Okay, so... Yeah. It's going to be... Okay, understood.

All right, because if I look at... I know when you announced the dividend policy today, It was close to 7%. And if I looked at the comps globally, not just in the U.S., you guys are right about the middle. And if I looked at your contracted earnings and based on our projections, it looks like there is capacity for the dividend to go up based off of free cash flow or just off of operating cash flow. So when the board meets to discuss a dividend in the future... What are some factors that could help the dividend increase for the coming quarter?

Look, the current dividend is less than 15 percent of earnings. So you are right to say that it's not a big percentage. The company is mainly a growth company. So the bigger part of its earnings is being used to fund the growth. But we want to reward shareholders with a decent dividend as well, and we will be doing that.

Great. Understood. And in terms of going back, I know we discussed this, but in terms of the new bills on order, I know the 24 ones are a little far out, but can you kind of let us know your thinking or the Charter's thinking on it? When you would look to charter some of these vessels, would it be, you know, like, if you look at the two that are being delivered in the first quarter of 24, do those discussions start in the third quarter, fourth quarter, or, you know, even sooner?

No, I think that you probably will not hear any news until towards the end of this year for the remaining new builds. Gotcha.

And with your comments that there could be some weakness further out beyond 23, would it be fair to say that you would look for more multi-year charters for the vessels coming off charters in 23? Yeah, probably.

Probably. If they are around, probably yes. But this business is so fluid, you always have to be on your toes to take decisions and change strategy if you want to optimize the return to your shareholders.

Got you. Okay. And one last question. So the order bug, you know, overall looks manageable, but, you know, in the intermediate and the feeder, it's fairly high. Does that How worried are you about the new ships that are going to be delivered? Do you feel that those will be more replacement vessels with older tunnels being scrapped? Or do you really feel like this could be a net add to the fleet and that could push down rates as we move beyond 24?

Actually, on the sizes of vessels that we have, the order book is rather small. The order book is high on the bigger vessels. So on our size, we have a relatively low order book and actually a quite old fleet. So a significant number of the elder vessels are small vessels. So there I think the growth in the fleet is going to be minimal, which makes us quite optimistic that rates will hold. But there are so many unknown factors that are playing around, so it's very difficult to predict the future. Got you. Okay.

All right, that's all I have. Thank you. Thank you. Thank you, James.

Sir, I pass the floor back to our CEO, Aristides Pitazza, for closing remarks.

Thank you, everybody, for listening in to our results of this quarter, and we'll be with you next quarter, hopefully with equally good results. Thanks, everybody.

That concludes our conference for today. Thank you for participating. You may now all disconnect.