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spk03: Thank you for standing by, ladies and gentlemen, and welcome to the Euro SEES Conference Call on the second quarter 2024 financial results. We have with us today Mr. Tasos Islidis, Chief Financial Officer of the company. At the sign while 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 one on your telephone keypad and wait for your name to be announced. I must advise you that this conference is being recorded today. Please be reminded that the company announced the results for the press release that has been publicly distributed. Before passing the floor to Mr. Islidis, I would like to remind everyone that in today's presentation and conference call, the Euro SEES will be making follow-looking statements. These statements are within the meaning of federal securities laws. Matters discussed may be follow-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 number two of the webcast presentation, which has the full follow-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 now I would like to pass the floor to Mr. Tasos Islidis. Please go ahead, sir.
spk07: Good morning, ladies and gentlemen, and thank you all for joining us today for our scheduled conference call. I'm Tasos Islidis, CFO of Euro SEES. Together with me is Simos Pariaros, our chief administrative officer. Our chairman and CEO, Mr. Islidis-Peters, who is usually hosting our earnings calls, is not available for this presentation this quarter due to overlapping engagements. The purpose of today's call is to discuss our financial results for the six-month and quarter-ended June 30th, 2024. It's time to slide three of the presentation to go over our income statement highlights. For the second quarter of 2024, we reported total net revenues of $58.7 million and a net income of $40.7 million, or $5.84 per diluted share. Adjusted net income for the quarter was $34.3 million, or $4.92 per diluted share. Adjusted EBITDA for the period was $42.3 million. A reconciliation for adjusted EBITDA to net income is presented in the press release that was released earlier today. I will provide you with some further details on our results later in the presentation. As part of the company's common stock dividend policy, our board of directors declared a quarterly dividend of $0.60 per common share for the second quarter of 2024, which will be paid on or about September 17th to shareholders of records on September 9th. The annualized dividend yield of our stock remains at around .5% based on the current surcharge. Our continuing dividend payments not only highlight our stable performance, but also reinforce our commitment to delivering sustained shareholder value. Along with our dividends, we return funds to our shareholders via our share repurchase program. As of August 6, 2024, and since the initiation of our repurchase program in 2022, we have repurchased 400,705 shares of our common stock in the open market, for a total of about $8.2 million. Our share repurchase plan of up to $20 million was extended for a year during 2023, and last month our board has extended it for yet another year. We will continue to use our share repurchase program at management discretion, depending on the level of our stock price, to enhance our ability to increase long-term shareholder values. Please now turn to slide four, where we discuss our recent sales and purchase, chartering, and other operational developments. Starting first on the SAP front, we can report that the previously agreed to be sold vessel, motor vessel EM Astoria, a 2780 ATU feeder container ship built in 2004, was delivered to its new owners. The vessel was sold for approximately $10 million, resulting in a gain on sale of about $5.7 million, or $0.82 per share, and having contributed to the company total earnings of more than $42 million since its acquisition in 2017. During the last four months, there was quite an activity around our new building program. On May 13, 2024, the delivery of our fifth new building vessel from a series of nine, Envy Monica, took place. Envy Monica is a fuel-efficient 1800 ATU feeder vessel. Following the delivery, the vessel commands a charter for a minimum of 10 months to a maximum of 12 months at a rate of $15,000 per day. Subsequently, the sixth of our buildings, Envy Stefania K, new-built fuel-efficient 1800 ATU feeder container ship from Demsay Yard, sister to Monica, was delivered on June 24, 2024. Like its sister, this vessel is equipped with a tier-3 engine and other sustainability-linked features, including alternative maritime power installation. After its delivery, Envy Stefania K commands a charter for a minimum of 23 to a maximum of 25 months at a rate of $22,000 per day. Furthermore, on July 19, 2024, we took delivery of our seventh new building, Envy Petis Park, an eco-friendly 1800 ATU feeder container ship from the same yard like the others. Again, the vessel is EDI phase 3 compliant and features a tier-3 engine, along with other sustainability enhancements, including alternative maritime power installation. The acquisition of Envy Petis Park was partly financed with a loan from Paria's bank, and following its delivery, the vessel commands a charter for a minimum of 23 to a maximum of 25 months at a rate of $24,250 per day. From the above, one can observe the progressive increase of the rates the three sister vessels were chartered, which fully reflect the market developments during the quarter. There are two more vessels remaining in our new building program, two 2800 PEU vessels. Their deliveries initially scheduled for November and December 2024 have been rescheduled to January 2025. Continuing our report here on the chartering side, Envy EDIR was extended for a minimum of 10 to a maximum of 12 months at $13,000 a day, starting from May 2024. While EDIR, the charter was extended for a minimum period starting from the beginning of August to a maximum period until August 23, at another gross daily rate of $13,500 per day. The vessel will then proceed to the Far East to have its fifth special survey in dry dock reform. She was then fixed and she will commence the charter for a minimum of 23 to a maximum of 25 months at another $16,500 rate that is staggered. So the first 17 months are at $19,000, the next six months at $9,500, while the two months of the delivery period of the option of $9,000. Finally, vessel Envy's species was fixed for a minimum period of 18 months to a maximum period of 20 months, a period of $18,000, starting from mid-August. We are happy to report that during the second quarter we had no ice-free period or commercial off-park time. Regarding dry dockings, motor vessels underwent the scheduled dry dock which lasted approximately 19 and a half days during the second quarter. Next, please turn to slide five for an update of our current fleet profile. Our current fleet consists of 23 vessels in the water, including and includes 16 feeder containerships and seven intermediate container carriers with total carrying capacity of just about 67,100 TEU and another age of about 14 years weighted by TEU. Turning to slide six, you can see the two remaining vessels that are under construction which are to be delivered as mentioned earlier in January in the first quarter of 2025. After the delivery of these two feeder containerships, our fleet will consist of 25 vessels with a total carrying capacity of just under 73,000 TEU. Let's now turn to slide seven for a graphical presentation of our vessel employment. As you can see in the slide, we have secured very strong charter coverage over the next two years with approximately 95 percent of our fleet fixed for 2024 and nearly 44.5 percent for 2025. These robust charter coverage combined with profitable rates for the remaining of our fleet, positions us for highly profitable quarters, enhancing our fleet liquidity through 2024 and 2025. Our chartering strategy is crucial in maximizing our revenues across market cycles and ensuring that we capitalize on favorable market conditions. At this point, let me pass the floor to our Chief Administrative Officer, Mr. Simos Pagdarios, to go over recent market developments.
spk06: Thank you, Tasso. Good morning from me as well, ladies and gentlemen. Let's now move to slide nine for a broader market review. Let's take a look first on charter rates, focusing on the development of six to 12 month time charter rates over the past 10 years. In the second quarter, continuing through the end of June 2024, container ship charter rates experienced a strong increase across all segments. If we look at the reference, the rate of a 2500 TEU container ship, the six to 12 month charter rate stood at about $34,000 per day, much more than triple the almost $9,250 per day which the market paid at the end of 2023. And well above the $15,719 per day. These trends are consistent across both smaller and larger container ship sizes, showing similar favorable comparisons to median and average rates. Now moving on to slide 10, we go over some further market highlights. We mainly want to highlight here that after climbing through the beginning of July, the market has shown signs of such stabilizing in the past three to four weeks, indicating a possibly temporary pause in the upward trend. Let's hope that this will reverse in the weeks to come. The increase up to the end of June is primarily attributed to ongoing disruptions in the Red Sea, return to some degree of force congestion and an early peak season with unexpectedly high volumes from Asia, predominantly to develop an economies leading to a very tight market. Average rates per day during the second quarter of 2024 increased by about 48% compared to the first quarter of 2024, while vessel prices increased as well and are now closer to the peak levels of 2022. The average second-hand price index also increased on average by about .5% in the second quarter of this year over the first quarter. The new building price index increased by about .4% in the second quarter of 2024 over the first quarter of the same year. New building prices continue to stay elevated due to inflation and extended yard forward cover. While new building contracting has moderated from the exceptionally high levels observed during the COVID-19 pandemic, it still remains relatively robust. This sustained activity is primarily driven by cast-rich liner companies eager to renew their fleets with alternative fuel-capable vessels. However, this is primarily focused on higher bigger size ships. As of July 15, 2024, the idle fleet excluding vessels under repair stood at a 170,000 TEU, representing just about .6% of the total fleet and it basically consists of ships that are under section as they are owned or related to Iranian interests. So essentially we can say that there is no idle fleet at all. I will now give you some figures about container recycling within this year. During 2024, up to now, 39 vessels accounting for about 54,000 TEU have been scrapped. We expect demolition activity to increase moderately in the remainder of this year after a number of very quiet years due to the very high market. In the second quarter of 2024, scrapping prices softened slightly to approximately $545 per light-well tonne on average, though still remaining above the average observed in the pre-pandemic year of 2019 by about 33%. Please now turn to slide 11. The latest update from IMF from July 2024, sees the global economy to experience modest growth over the next two years, with basically a cooling activity in the US, a stabilisation in Europe, and stronger consumption and exports in China. Risks to this outlook remain more balanced, however, there are upside risks to inflation and price pressures steaming from the new trade or geopolitical tensions that may appear. Any further escalation of trade tensions could raise near-term risks by increasing the cost of imported goods along the supply chain. As a result, the IMF has maintained this year's growth forecast at 3.2%, consistent with its April projection. In the meantime, the forecast for 2025 was slightly reduced by .1% to 3.3%, with China and India bringing the most notable upward revisions. On the other hand, on the other end, Japan's growth has been revised the most downwards for this year from .7% to .7% from 0.9%, and Russia's in 2025 down to .5% from .8% in their previous forecast, and much lower than the .2% that is predicted for Russia for 2024. Overall, we see that the flip continues to grow at a very fast pace, having expanded by about .5% only this year without accounting for idle vessel reactivation, which has been significant during 2024, as the idle flip has stringed from about 800,000 TEUs about 12 months ago to just 170,000 TEUs today. Now, as China's economic momentum is faltering, as the country's economy has further matured, the world is looking for the next tiger or tiger that will lead its economic growth. In that respect, India's growth is projected to remain robust at 7% this year. The upward revision is attributed mostly to improve private consumption. However, the IMF cautioned that growth is expected to slow down slightly in 2025 in India to 6.5%. In the meantime, the Asian five economies remain the main aging for the global economy, with the forecast remaining broadly unchanged from earlier. Now, according to Clarkson's forecast, containers trade demand is anticipated to rise by a record .7% in TEU-mile terms in 2024, up from the previous estimate of .2% back in April. And this is happening due to further re-routing through the Red Sea caused by ongoing disruptions in the area and also exceptionally good volumes from Asia to Europe and the U.S. along with the developing countries. However, the effects of the Houthi attacks in the Red Sea that have caused these disruptions are expected to normalize at some point going forward, something that we expect will create significant challenges in the market for a period of time. Now, please turn to slide 12, where you can see the total fleet age profile and container ship order. The container ship fleet is becoming older with about 30% of the capacity being older than 15 years, something that will work as a significant buffer in the mid-year future when this ship centers the historical average scrapping age. As a result, to import the order book as a percentage, that's at around 22% reduced from a peak of 30%, which we saw last year. Turning on to slide 13, please take a note that the fleet provides the smaller ships of the feeder sector, of the -3,000 EU range. These sizes of vessels are the backbone of our operations and the primary focus of our new building program. The order book here stands at a mere .7% as of the beginning of August 2024. Now, according to Clarkson's new deliveries are projected to be approximately 8% within the entire 2024, with the vast majority of these ships already delivered. The number drops to .8% in 2025 and 1% 2026 and beyond, suggesting that going forward we will have minimal deliveries of this side segment. With over 50% of the fleet of this side segment being over 15 years old, these favorable fundamentals suggest an anticipated reduction in fleet size in the coming years. Let's now move to slide 14, where we discuss our outlook summary for the container ship market. Despite the stabilization in July, the container shipping market has seen significant gains throughout 2024. Freight rates have shared the highest level outside the pandemic period, while charter rates have climbed steadily to historically robust levels. These strong market conditions are largely driven by disruptions in the Red Sea, as mentioned before, which have forced vessels to divert around the Cape of Good Hope, leading to increased vessel demand and port congestion. Additionally, healthy container volumes are bolstered by continuously strengthening global economy. Freight rates have served and charter rates have more than doubled since the end of the year, of the previous year, reaching their highest level outside of the COVID-19 period, and the strong markets of 20 years ago, of around 2004, 2005 period, where the market was at extremely high levels. The context index has increased by 164% since the end of 2023. Looking into the second half of 2024, the developments in the Red Sea will play a critical role in saving the sector's immediate outlook. The situation remains uncertain, with any resolution heavily dependent on the political landscape. Even if conditions improve, the destruction is expected to continue for several more months. In such a scenario, charters are likely to opt for much shorter duration charters. As we move now into 2025, the container shipping market is anticipated to face challenges, particularly if disruptions in the Red Sea ease. The fleet is projected to expand, creating capacity management challenges due to significant cumulative supply growth. Nonetheless, forecasts indicate a respectable year for container trade volume growth. Additionally, potential reductions in the vessel's speed driven by efforts to reduce emission and adhere to green policies may help alleviate some of the supply pressures potentially stabilizing the market. The energy transition and the decarbonization process of the world's fleet is steadily gaining momentum in the container ship sector and definitely at a much faster pace than the rest of the shipping sectors, creating much more favorable dynamics for the newer ecovessels, something that has worked very well for the new building investment program of uses. Going forward, we anticipate that the premium for charter rates achieved by ecovessels will further widen. This is because charters and the industry as a whole are becoming increasingly sensitive to greener transport options, thereby placing a higher value on vessels with lower environmental impact. Furthermore, the introduction of further environmental measures and carbon taxes worldwide will further boost the premium on these kinds of ships. Now moving on to the last slide of my part, slide number 15. Please take a note of the significant increases in both charter rates and asset prices that we have seen during 2024 following the Red Sea developments. What is most interesting though is that the new building price index is almost at the highest historical levels, something that gives further value to our investment program and proves the rightness of our decision to proceed with the vast expansion of our fleet through our new building program just a few years ago. Eurosis will help the cash balance to fund the remaining equity portion of our new building program. We plan to continue returning money to our shareholders through dividends and share buybacks at management discretion and we continue to plan the renewal and expansion of our fleet with strategic investments that we believe will create further value to our shareholders. And with that, I will pass the floor back to our CFO, Tasos Aslidis, to go over our financial highlights in further detail.
spk07: Thank you, Zimos. Let me continue. In the syndicated in the beginning, I will provide you a little bit more detail on our financial results for the six and three month periods and its convergence and compared them, as I said, with the same periods of last year. So that's slide 17. For the second quarter of 2024, the company reported total net revenues of $58.7 million, representing a .1% increase over total net revenues of $47.7 million during the second quarter of last year. This was the result of increased time to operate on average that our vessels earned in the second quarter of this year compared to last, but primarily due to the increase in the average number of vessels we own and operated in the second quarter of 2024 compared to the same period of last year. The company reported net income for the second quarter of 2024 of $40.7 million compared to $28.9 million for the same quarter of 2023. Interest and other financing costs for the second quarter of 2024 amounted to $3.5 million, partly offset by $1.4 million of imputed interest income earned because of the self-financing of the pre-delivery installments of our new buildings, which in that interest is capitalized. This is to be compared to $2.4 million of interest expense in the finance cost in the second quarter of 2023, again partly offset by $1.2 million of imputed interest income. This increase of interest expenses is primarily due to the increased amount of debt we carried in the current quarter compared to the same quarter of last year. Adjusted to be that for the second quarter of 2024 was $42.3 million compared to $30.6 million achieved during the second quarter of last year. Basic and diluted earnings per share for the second quarter of 2024 were $5.89 and $5.84. They calculated on approximately $6.7 million basic and $7 million diluted weighted average number of shares outstanding compared to basic and diluted earnings per share of $4.13 and $4.15 respectively for the second quarter of last year, calculated on approximately $6.9 and $7 million basically diluted weighted average number of shares outstanding. Excluding the effect on the income of the unrealized gain in derivatives, the gain on sale of a vessel, the amortization of below market time charges acquired, and the vessel depreciation charge on the portion of the consideration of vessels acquired with the past time charges allocated to the below market charges, the adjusted earnings for the quarter ended June 30, 2024, which has been $4.95 per share basic and $4.92 per share diluted compared to adjusted earnings of $4.19 and $4.17 per share basic diluted the same quarter of last year. We make this adjustment because usually security analysts not include the above items in the published estimates of earnings per share. Let's look now at the numbers for the corresponding six-month periods ended June 30, 2024, and compare them with 2023. So for the first half of this year, the company reported total net revenues of 105.4 million, representing .6% in case of a total net revenues of 89.6 million during the first half of 2023. The company also reported a net income for the period of 60.8 million compared to 57.6 million for the first half of last year. Interest and other financing costs for the first half of 2024 amounted to 6.6 million, again partly offset by 2.7 million of imputed interest income compared to 4 million in 2023, the first half of 2023 offset by 2.3 million of imputed interest income. Again, the increase of the interest expense is due to the higher levels of debt that we carried on average this year versus last year. Adjustable data for the first six months of this year were 66.9 million compared to 56.6 million achieved during the first half of 2023. Basic and diluted earnings per share for first half of this year were .78.77 and $8.71 respectively, calculated on approximately 6.9 basic and 7 million diluted, where it covers number of shares outstanding, compared to basic shares outstanding for the same period, the first half of 2023. Excluding again the effect on the net income for the first half of the unrealized gain on derivatives, the gain on vessel, on the sale of the vessel, the amortization of below market time charges acquired, and the related vessel depreciation, the adjusted earnings per share for the six month period ended June 30, 2024, which have been $7.63 and $7.57 diluted respectively, compared to adjusted earnings per share of $7.29 basic and $7.26 diluted for the same period of last year. Let's now turn to slide 18 to review our fleet performance. As usual, we'll start our review by looking at the fleet utilization rates for the second quarter of 2024 and 2023. Our fleet utilization rate is broken down into commercial and operational components. During the second quarter of 2024, our commercial utilization rate was 100% and our operational utilization rate was 99.8%. On average, we had 21.3 vessels owned and operated during the second quarter of 2024 and on average again about $639 per day compared to 18 vessels for the same period of 2023 and on average $30,151 per day. Our total daily operating expenses, including management fees, generally administrative expenses, but excluding dry working costs, were $7,193 per vessel per day during the second quarter of 2024 compared to $7,829 per vessel per day for the second quarter of last year. If we look further down in the table, we can see again the cash flow break even rate for the second quarter of 2024, which amounted to $13,000 almost $13,700 per vessel per day compared to $13,841 per vessel per day for the same period of last year. And finally, if we look at the very last line of the table, of this slide, we can see the common dividend that we pay expressed in dollars per day per vessel. So for the second quarter of 2024, that amounted to $2,147 while for the same period of last year it amounted to $2,117 per vessel per day. Half a slide left to discuss. Let's now move to review the six-month figures for 2024 and 2023. So during the first half of 2024, our commercial and operational utilization rate was .9% each compared to .1% commercial and .7% operational for the same period of last year. On others, we only operated 20.4 vessels in the first half of this year, earning $29,836 per day compared to 17.5 vessels earning another $29,714 per vessel per day for the same period the first six months of 2023. Operating expenses, again, including management fees and GNAs, but no direct working costs, other $7,563 per vessel per day in the first half of this year compared to $7,948 for the same period of last year. If we look again down to our break even levels, for the first six months of 2024, we had $15,372 per vessel per day, compared to $13,996 for the first six months of 2023. And if we include dividends in our total, $2,238 per vessel per day compared to $2,194 for the same period of last year. Let's now move to the next slide, slide 19, to review our debt profile and our forward break even levels. As of June 30th, our total debt stood at approximately $208 million, and that figure does not include the loan we drew to finance our last delivery, Pepe Star, which we took deliver in July. The chart, though, that we saw there, the repayments shows debt repayments over the next year. Those bars do include the repayments that come, that are related to the Pepe Star. As you can see, in 2024, we already made loan repayments of $17.5 million, approximately $17 million in the first half, and we expect to make an additional $17.1 million of repayments and a balloon payment of about $1.8 million in the second half of the year for a total loan repayment amount of about $35.9 million. In 2025, our projected loan repayments are about $22 million, along with balloon payments of around $17.5 million, and we typically
spk00: will
spk07: refinance our balloon payments. And in 2026, we do not have any balloon payments due, but we have to make loan repayments of around $15 million. We also saw in this chart our payments for 20, loan repayments and balloon payments for 2027. Our senior debt carries an average margin of about 2.17 percent, and assuming a base rate, a base offer rate of 5.25 percent, our senior debt has a total cost as of June 30th of around 7.4 percent. If we include in the cost of the debt the savings we have achieved by swapping a portion, about 10 percent of our debt, at a base rate of 3.4 percent instead of 5.25, the overall cost comes down to about 7.1 percent. We expect to assume additional debt for the two vessels to be delivered towards the end of the year beginning of next year, of around 55 million. So the 208 that we have as of June 30th, plus the loan we do for Petty Star, plus the loans for the upcoming deliveries, will be the total indebtedness. I'd like to draw your attention to the bottom of this slide, where we present the levels and components of our expected cash break even for the next 12 months, and so the break even at various definitions. I will concentrate on the final one, including interest and loan repayments. Our projected cash flow break even level for the next 12 months expected to be around $12,921 per vessel per day. To sum up our presentation, let's move to the next slide, like lending, to review our balance sheet. This slide presents our assets and liabilities in a simplified format. Our assets mainly include cars and other current assets, advances for vessels under construction, and of course the book value for our vessels in the water, shown here. As of June 30th, 2024, we have cashed another current asset amounting to about 85.5 million. We have paid advances for our rebuilding program of about 41.5 million, while the book value for our vessels stood at around 420 million, resulting in total assets at book value of about 540 million. 47.5 million. On the liability side, as I mentioned, as of June 30th, our debt stood at 208 million, which represents approximately 38% of the book value for our assets. We also get other liabilities like the fair value of below market charges acquired, and other liabilities altogether amounting to about .5% of our total assets, leaving the rest to be our net book value. However, it is important to highlight here that the market value of our fleet significantly exceeds its book value. We estimate that the charter adjusted value of our fleet to be around 550 million, which translates to a net asset value for the company of about 458 million, or around $65 per share. Our closing price yesterday was $136 a share, a level that indicates a significant discount to our NAV, and thus we believe represents a considerable appreciation potential for our homeless investors. With that, we'll finish our remarks, our prepared remarks, and we would like to open the floor for questions, if there are any.
spk03: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star one from your telephone keypad, and the confirmation tone will indicate your line is in the question queue. Please press star two if you'd like to withdraw your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Thank you, and our first question is from the line of Tate Sullivan with Baxel Group. Please receive your questions.
spk05: Thank you, thank you. Both my question is on charter coverage. I think that's correct.
spk07: We had pretty much the overwhelming majority of our customers stayed true to their signature and to the contracts. We had only one instance a couple of years ago of a charter that defaulted. So we expect to be able to collect on our charter contracts. As the market recovered, the portion of our contracted revenues that represents above market charters has declined. So while at the end of last year, we estimated about 150 million worth of contracted revenues that were above market charters, that number now is significantly lower, is below 30 million, I believe, in the last calculation. So as long as the market stays at the current levels, so fluctuates around the current levels, I think that risk is minuscule.
spk06: In any case, the liner companies have extremely strong balance sheets and extremely profitable year this year. It would be a very big surprise to see that request for negotiating older charters. At the moment, liners make tons of money on the ships, even on expensive ships that they have invested over the last few years. So I think the question at the moment, it's not much of an issue for us.
spk05: There
spk06: is no
spk05: risk at
spk06: the
spk05: moment on that. Thank you. And then with the increase in the ship values particularly and then new build prices increasing with your leverage level relative to ships' asset value, would you look to acquire secondhand ships more than possibly place new build orders at this time?
spk07: I think, as I believe we have discussed in the past, we have our antennas out for opportunities that may appear. We try to make sure that we evaluate properly the risk of every acquisition. Prices now that the rates are high, are also high, and we would do a secondhand vessel if the residual value risk at the end of the employment of a vessel is acceptable, typically bringing the value of the vessel below historical others or even lower than that. So we are looking, we have the capacity, we have the liquidity, and we are looking both at the secondhand market and also on the new building market, but for the time being we are sitting tight, I guess, given the developments.
spk03: Okay.
spk07: Thank you. Thank you, Tate. Thanks for the interest.
spk03: Our next question is from the line of Lars Ysiris with Arctic Securities. Pleased to see you. Three questions.
spk04: Oh, first of all, congratulations on the great quarter. I just have a couple of questions. I was wondering, your voyage expenses turned positive for the quarter. How large was the bunker gain effect on voyage expenses following the sale of Asturlal?
spk07: I guess the voyage expenses have to do really with the sale of bunkers when we change charter. I don't think there was something that was dramatically out of the ordinary. We typically have very low voyage expenses because the vessels are chartered, and in certain cases we might have some gains because when we sell the fuel to the next charter, we make money on the transaction, and that, I guess, is what is reflected in this quarter. So it's a small amount compared to the overall level of revenues in any case. Okay. And it has to do primarily with what I said. Sometimes when we change charter, we sell the fuel that is the inventory that's on the board, and that could result on a small gain or a small loss.
spk04: Yeah, okay. Thanks. Additionally, in terms of dry dockings, you had two vessels, two dry docking during the quarter. How should we, what can you expect for the second half of 24, and cost-reliable and the potential dockings?
spk07: Yeah, we had two vessels completing the dry dock. The one was primarily done in Q1. We had really one dry dock that took place this quarter, Synergy Key Length. For Q3, I believe we already said in the presentation, we have Joanna that is going to go through dry dock. On the top of my head, I don't have any other vessel that we expect, but I can get back to you on that. We have seven new buildings of the 23, so 16 vessels is on the regular dry docking cycle. So on average, one to two vessels should be going through some form of special survey, either in water or dry dock every quarter. I can get more specific about the profile of the upcoming dry dockings. But from the nine new buildings, we don't expect anything. Okay,
spk04: thank you very much. That's all from me.
spk03: Thank you. As a reminder, if you'd like to ask a question today, please press star one from your keypad. The next question is from the line of Mark Reichman with Noble Capital. Please just hear their questions.
spk01: Good morning. You know, you mentioned the premium that EcoVessels garner, and I was just kind of curious on your thoughts. Where exactly does the container ship market stand in terms of lowering emissions over time? And what are the implications for your fleet, and how are you planning in terms of developing your fleet as the demand for lowering emissions grows? So that's the first question.
spk07: Okay. I mean, there are a couple of ways we're looking at this. One thing is we have embarked on a pretty significant fleet renewal through our new building program. These vessels consume a lot less fuel and have very direct effect on reducing emissions. The second component is that we are issuing a retrofit program. We have already had three vessels gone through that. That involves a significant investment from us, which in some cases we share with the charter of the vessel because they benefit as well. And in the cases that we have done it, we have registered reduction of fuel consumption of the order of 25 to 30%. So, correspondingly, emissions of the same magnitude have been reduced from those vessels. As we move through our dry docking cycle of the vessels, depending on the market conditions, we are judging and with a bias of doing it, of pursuing retrofits for our vessels. The new buildings, I think, are the best vessels that can be built with today's technology and contribute directly to lower emissions. Simo, do you have anything to add? Yes. I
spk06: wanted to add, Mark, that on the retrofits, because this has a basic cost with it, we're trying to share that with some of our clients if they have the interest, which they usually have because they have the vessel under their charter. They make most of their savings, so they have interest to participate, and that works well for us as well. Also, I wanted to mention that the new buildings of the same size, of the same capacity, we have noticed that our 2,800 EU vessels and the 1,800 ships that we have gotten delivery of, they perform about 40% lower fuel consumption than ships of the same size that we own or have owned in the past, which is impressive. And this is only for the conventional ships. If you add the LNG option or you use the LNG, the savings are even more. So we are happy with the developments in our actions in terms of renewing our fleet and try to contribute from our side as much as possible to the process, to the decarbonization process of the world fleet.
spk01: The second question is, when I look at slide 10 and I see the shipping rates, it kind of implies that the third quarter should be pretty strong as well with maybe, hard to say whether rates have peaked in July or August, but certainly looking at these numbers, it seems like the third quarter should be a pretty strong one with good cash flows. So as you think about capital allocation going forward, in your press release, you mentioned evaluating your creative investment opportunities, but with the market values exceeding book values by a fairly large margin, it doesn't seem like the best time to go out and buy secondhand vehicles or secondhand vessels. So would you be more inclined to invest in new builds or will there be the timing will be right where if you can pick up secondhand vehicles closer to a book value, so to speak, and then retrofit them, how are you thinking about new builds versus second acquiring secondhand vessels and retrofitting them?
spk07: And as I mentioned earlier, I think we are looking always for interesting investment opportunities. We realize that the second gen prices are elevated and the deals that we will be willing to the manufacturers that we will be willing to enter would have to have acceptable residual value risk. That would be the scrap price if the vessel is older or a price that is well within historical averages or sometimes or below historical averages. So we will not buy obviously a vessel without being able to secure a charter at the same time that brings down our cost to the levels I mentioned. We do look also at the new building market and we try to create a balance between the returning funds to our shareholders, the dividends and the survive back is a proof on that, retaining certain liquidity in case opportunities appear and of course we still have to complete the funding of our new building program. So our balance, it starts building more liquidity in the second half of the year and to the next year and this question that you're asking will become more pressing then how we can use that extra liquidity but we're trying to balance it between those three areas.
spk06: But the bottom line mark is that we won't take market exposure today's secondhand prices. As Tassos said, there has to be a very low residual risk and any secondhand project that we may look at needs to be covered with a charter that brings down the residual value to very manageable levels. At the moment, the market is not offering such projects so we're not really interested in today's secondhand prices. The new building front has opportunities that we are exploring. The yards are extremely busy and they're offering slots way down the road so this is something that we are evaluating. We feel that new building prices are so high for several reasons including the very high number that the inflation was in the last three, four years in the world which has created a trend that cannot go back and also the fact that modern ships are of different quality and different specifications than older ones meaning that the cost of building a modern ship of the same size is de facto more expensive today than it was a few years ago simply because of the specifications of the ship and this can also not reverse. So I think bottom line is that at the moment we're evaluating.
spk01: Exactly. Okay, thank you very much. That's very helpful. Thank you, Mark.
spk03: Thank you. Our next question is from the line of Clement Mold with Valued Investor Edge. Please go with your
spk02: question. Good afternoon. Thank you for taking my questions. I wanted to start by asking about the vessels coming open later this year which, excepting the synergy Busan, are mostly in the feeder segment. Should we expect some of these vessels to be forward fixed over the coming weeks or are you comfortable waiting until closer to re-delivery?
spk07: I think we are in the market to look for charges for these vessels. Of course, you cannot dictate on the market your wishes. As you know, the market became a little softer in July compared to June. So I think which is a function of many developments. One is that there is an evolving geopolitical scene with all the travels around the world. At the same time, seasonal low in the summer. So we believe that at the end of the summer we have a clear picture of how forward we can fix some of these vessels. The market is still there but is a little softer. We have to admit in July and compared to June. We
spk06: still have received a few indications from the ship that we could have replied and they could have been extremely profitable but we have decided as a company to wait a few weeks and re-evaluate things after the summer holidays come closer to an end and as people get back to their work and re-evaluate the conditions
spk02: at the time. That is very helpful. Thank you. You also mentioned you expect the spread between modern and older vessels to widen going forward. I was wondering if you could provide some commentary on the EU ETS and whether you expect it to have a significant, like to lead to a significant portion of recent new builds to be employed in Europe and if so, do you think this could lead to some inefficiencies? The
spk07: more, I don't want to use the word penalties, but the more penalties are placed on the emissions and which are higher from the older ships, the bigger the difference, the gap will be between young ships and older ships and that naturally could create on sort of a two-tier market chart wise for younger versus older ships. It would make younger ships more attractive and it would justify a new building program even more so.
spk06: As a company we anticipated that things will go like that. When we took the decision to invest such a big amount of our capital, especially for the size of our company, to a new building which at the time was 50% of our current fleet, the decision was based on these fundamentals that the industry will have to pay for the pollution that it creates and going forward this will even intensify. So we have great belief in those modern ships.
spk02: Makes sense. That's all from me. Thank you for taking my questions and congratulations for the quarter. Thank you.
spk03: Thank you. We have reached the end of the question and answer session. I will turn the call back over to Mr. Aswini for closing remarks.
spk07: I would like to thank everybody for your interest and for joining our call today and I would like to renew our, to see each other at least via the earnings call in three month time. Enjoy the rest of the summer everybody. Thank you also very much from my side.
spk03: This concludes today's conference. We disconnect your lines at this time. Thank you for your participation.
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