Euroseas Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 21, 2024

There are 6 speakers on the call.

Operator

Thank you for standing by, ladies and gentlemen, and welcome to the UroSee's Conference Call on the Q4 2023 Financial Results. We have with us Mr. Aristides Pittas, Chairman and Chief Executive Officer and Mr. Tassos Aslidis, Chief Financial Officer of the company. At this time, all participants are in a listen only mode.

Operator

There will be a presentation followed by a question and answer session. I must advise you that this conference is being recorded today. Please be reminded that the company announced their 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, UroCs will be making forward looking statements.

Operator

These statements are within the meaning of the federal securities laws. Matters discussed may be forward looking statements, which are based on current management expectations that involve risks and uncertainties that may result in such expectations not being realized. I kindly draw your attention to Slide number 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 now, I would like to pass the floor to Mr.

Operator

Pittas. Please go ahead, sir.

Speaker 1

Good morning, ladies and gentlemen, and thank you all for joining us today for our scheduled conference call. Together with me is Tasos Aslidis, our Chief Financial Officer. The purpose of today's call is to discuss our financial results for the 3 12 month period ended December 31, 2023. Let us turn to Slide 3 of the presentation to go over our financial results. We have had another strong quarter, having reported total net revenues of $49,100,000 and a net income of $24,700,000 or $3.56 percent basic and diluted sales for the Q4 of 2023.

Speaker 1

Adjusted net income for the quarter was $25,000,000 or $3.61 per diluted share. Adjusted EBITDA for the period was $32,400,000 Please refer to the press release for reconciliation of adjusted net income and adjusted EBITDA to net income. Our CFO, Tasos Aslidis, will go over our financial highlights in more detail later on in the presentation. We are very pleased to announce that our Board of Directors have declared a quarterly dividend of 0.6 $0 per common share for the Q4 of 2023, reflecting a 20% increase from the prior quarterly dividend of $0.50 per share. The dividend which is payable on or above March 11, 2024 to shareholders of record on March 4, 2024, reinforces our durable growth business model, which is supported by strong cash generation and financial strength and further demonstrates our commitment to delivering shareholder returns.

Speaker 1

The annualized dividend yield based on the current share price is about 7% base. This is the 8th consecutive quarter of paying meaningful dividends. As of February 21, 2024, we have repurchased 400,000 shares from in the open market for a total of about $8,200,000 under our share repurchase plan of up to $20,000,000 announced in May 2022 and extended for another year. Thus, about 5.5% of our outstanding shares have been repurchased and withdrawn. We will continue to use our share repurchase program at management's discretion depending on our stock price to enhance our ability to drive long term shareholder value.

Speaker 1

Please turn to Slide 4, where we discuss our recent sales and purchase after the new operational developments. The delivery of our sales vessels from our 9 vessel newbuilding program took place on February 6. Motor Vessels tender sold is an echo EDi Phase 3 vessel, 2,800 TEU feeder containership new building from Hyundai Mi, Podokye in South Korea. The vessel is equipped with a Tier 3 engine and other sustainability linked features, including installation of an AMP, an alternative maritime power system. The vessel is financed through retained earnings and the sale and leaseback agreement with the Japanese owner and leasing house.

Speaker 1

Following its delivery, motor vessel tender zone commenced an 8 to 10 month charter at a rate of $17,000 a day. On the chartering side, motor vessel AGN Express, our largest and smallest vessel, was fixed for a minimum period of 15 days at $7,000 per day, then extended with the same charters for 1 to 2 months at the same level of $7,000 a day and thereafter fixed again for a minimum of 35 to maximum 55 days, again at $7,000 per day. Motor versus Siemens D'Anseberg charter was extended for approximately 40 days to 60 days at $18,250 per day until February 2024 and subsequently fixed at a nominal $2 per day for a trip with empty containers to the shipyard to have a scheduled drydock performed. The other vessel that we fixed during the quarter was Motor Vessel Joanna, whose charter was extended for a minimum between 25th April to maximum 25th May at $10,250 per day. Regarding dry dockings, motor vessel Synergy Busan underwent its scheduled special survey for approximately 25 days in the month of December.

Speaker 1

During this period, retrofits valued at around $1,600,000 were conducted. They were partially funded by the charters. This resulted in a performance improvement of over 25% for the vessel. Meanwhile, motor vessel Synergy Oakland was also drydock for approximately 18.5 days to pass scheduled special survey. There was no commercial or item of hire time during the quarter.

Speaker 1

Next, please turn to Slide 5 for an update on our current fleet profile. Our current fleet is comprised of 20 vessels in the water, including 13 feeder container ships and 7 intermediate container carriers, with a total carrying capacity of just under 61700 TEU and an average age of 16.1 years. Turn to Slide 6, where we show our 6 remaining vessels under construction with deliveries expected throughout 2024. The 6 new buildings have a total carrying capacity of 13,800 TEU, including 3 with a carrying capacity of 2,800 TEU each and 3 with a carrying capacity of 1800 TEU each. On a fully delivered basis, the company's fleet will increase to 26 vessels with a total cargo capacity in excess of 75,000 TEU.

Speaker 1

Let's now turn to Slide 7 for the vessel employment update. As you may see, we have very strong charter coverage throughout the next 2 years with about 71% of our fleet being fixed for 2024 and almost 23% for 2025. Our significant charter coverage at profitable rates for the remainder of the year suggests highly profitable quarters that will further enhance our free liquidity throughout 2024 into 2025. Due to disruptions in grade patterns caused by the attacks on vessels on the Red Sea, charter rates have increased from their low leverage in December 23. Certain of our vessels whose charters expire during this time have benefited from these disruptions, and we anticipate our vessels opening up soon as well as our upcoming new buildings will likely benefit from the same trend.

Speaker 1

Let's turn to Slide 9 to review how the 6 to 12 months time charter rates have developed over the last 10 years. During the Q4 of 2023, containership markets were down across all segments, but the trend has reversed since December, primarily due to the disruptions in the Red Sea as vessels are diluted from the region. For the sectors we primarily operate in, charter rates are about 30% to 35% higher in February from the low sheen at the end of 2023. As of February 16, the 6 to 12 month charter rate for a 2,500 TEU container ship stood at $15,500 per day approximately, which is higher than the historical median of $9,200 per day, but at similar levels to the 10 year average rate of $15,186 per day. The trends and comparisons to median and average rates are similar across the sizes of 17000 to 4,400 TEU vessels.

Speaker 1

Moving on to Slide 10, we go over some further market highlights. During the Q4 of 2023, as mentioned, rates were down across all segments. The current increase is mainly attributed to the Red Sea crisis, which is still evolving, and its full impact is yet to be seen. It's quite clear, however, that these events will shape the way charter rates develop at least in the near future. Average rates per day during the Q4 of 'twenty three decreased by 21% compared to the 3rd quarter of 2023.

Speaker 1

The average secondhand price index saw a decrease of around 7.7% during the Q4 of 2023 compared to the Q3 of 2023. But we have already seen a reversal of this trend during January February. While prices continue to lag significantly behind the peak levels seen in 2022, they are above the average levels observed before the COVID-nineteen pandemic. The newbuilding price index maintained stability in the Q4 of 2023 compared to the Q3. Newbuilding prices continue to stay elevated due to cost inflation and extended yard growth.

Speaker 1

Although there has been some easing in newbuild contracting from the exceptional firm levels witnessed during 2022, it remains relatively strong, driven by ongoing interest from financially robust line of companies seeking to renew their fleets with a pair of fuel vessels. As of January 29, 2024, the idle fleet, excluding vessels under repair, stands at 0.23000000 TEU, accounting for 0.8% of the total fleet. This marks a decline from its peak of 800,000 TEU just 1 year ago, with a downward trend observed since then. In 2023, 83 vessels totaling 160,000 TEU approximately were scrapped. Because of historically healthy charter rates, demolition activity remains moderate compared to historical standards in 2023.

Speaker 1

However, it is anticipated to notably increase in the coming years due to factors such as weaker markets, supply growth and environmental regulations adding pressure. In the Q4 of 2023, scrapping prices softened slightly to approximately $5.35 per lightweight ton, although they remained about 30% higher than the average observed in 2019. Finally, the fleet expanded by a strong 8.1% in 2023 without accounting for idled vessel reactivation. Please now turn to Slide 11. With its latest update in January 2024, the IMF raised its forecast for global growth compared to the October 2023 outlook from 2.9% to 3.1% for 2024 and from 3.1% to 3.2% for 2025 as a result of greater than expected resilience in the United States and fiscal support in China.

Speaker 1

We expect to see this recovering, although the IMF also warns of risks from wars and inflation. Risks surrounding COVID-nineteen have declined in much of the world. The forecast for 20242025 is, however, still below the historical average of 3.8% as elevated central bank policy rates to fight inflation and the withdrawal of fiscal support that meet high debt weigh on economic activity. Low underlying productivity growth also accentuates this slow trend. As per the analyst, global growth is likely to recover from 2025 onwards, supported by the unwinding of supply side issues and the interest rate cuts starting in 2020 24.

Speaker 1

Global inflation is forecast by the IMF to decline steadily starting from 2024 due to tighter monetary policy aided by lower international commodity prices. It is expected to fall to 5.8% in 2024 and 4.4% in 2025, with the 2025 quarter having been priced down. However, new commodity price spikes from geopolitical shocks, including continued attacks in the Red Sea and supply disruptions, all will perceive more persistent underlying inflation, China's growth forecast of 5.2% in 2024 and 4.6% in 2025 has been revised upwards even after having had major headwinds due to lower confidence and underwhelming boost economic activity following its reopening and persistent property sector issues. Similarly, growth in other emerging and developing countries, including India and Asia and continue quite strongly for the next couple of years. India's growth is expected to be 6.5% in both 2024 and 2025.

Speaker 1

Containership trade demand was forecast to increase quite significantly in 2024 by Clarksons in the January report. As ton mile demand will be affected by disruptions in the Red Sea and restrictions from the Suez Canal and Panama Canals as well as the slower speeds necessitated by the IMO environmental rules and the introduction of EU ETS. We anticipate that Clarkson's apparent demand estimate will further rise in February as the effects of the Red Sea near closure are appearing more severe than originally assumed. Please turn to Slide 12, where you can see the total fleet age profile and containership order book. The containership fleet is relatively young with most vessels under 15 years old and only 10% of the fleet over 20 years old.

Speaker 1

The largest percentage of which though lies within feeder vessels suggesting high potential recycling for this type of ships. As of February 2024, the order book as a percentage of total fleet stands at 23.9%, down from nearly 30% 6 months ago. Turning on to Slide 13, we also go over the fleet age profile for ships in the 1,000 TEU to 3,000 TEU 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 8.9% as of February 2024, half the rate a year ago.

Speaker 1

According to Clarksons, new deliveries are projected at an estimated 8% in 2024 and a very modest 1.9% in 2025. Furthermore, with over 50% of the fleet aged over 15 years. These are very favorable fundamentals for this sector. New environmental regulations suggesting lower speeds and increased cycling in the segment in the coming years augment the positivity of the thesis in favor of vessels of the sizes we operate. Let's move to Slide 14, where we will discuss our outlook summary for the container ship market.

Speaker 1

Container shipping faces pressure due to the influx of new capacity into the fleet, especially during this year when deliveries are expected to amount to about 11% of the fleet measured in TEU. However, recent events primarily in the Red Sea but also the Panama Canal and the implementation of the EU ETS have led to a doubling of shipping freight rates and reversing the drop in Shasta Beach. The context index has served by 33% since December 21, 2023. In 2024, significant challenges were initially expected. However, the balancing of supply and demand by the situations in the Suez Canal, the Red Sea and the Panama Canal are casting doubts on this unfavorable scenario.

Speaker 1

Following recent vessel attacks in the Red Sea and the Gulf of Aden, major containership operators have announced a pause in transit through the area. This rerouting via the Cape of Good Hope impacts capacity supply and demand very positively. If the situations in the Panama Canal and the Red Sea are resolved, a further softening in container freight and charter markets is anticipated, driven by the accelerated capacity growth. However, an extended period of vessel rerouting away from the Suez Canal would probably lead to further increased charter rates. In 2025, in the absence of the Suez Canal, Red Sea and Panama Canal issues, supply and demand dynamics suggest a continued softening of the market.

Speaker 1

Market conditions are very difficult to predict, and sensitivity to factors such as geopolitical developments, capacity management, vessel speed and various other inefficiencies like congestion are crucial and can't be easily forecast. If, however, the normalization occurs and both the Suez and the Panama Canal operate efficiently, the softening in 2025 could be significant due to the substantial fleet expansion. The transition towards cleaner energy sources is gaining momentum in the container subsector. While there is a clear shift underway, the long term outcome remains highly uncertain. The gap between charter rates achieved by eco friendly vessels is expected to widen further as charters increasingly prioritize environmentally friendly transportation options.

Speaker 1

Moving on to Slide 15. The left chart shows the evolution of 1 year time charter rate for containers with a capacity of 2,500 TEU since 2013. 1 year time charter rates are far below their peak in early 2022, but as previously mentioned have recovered to $15,500 per day, which is similar to the historical average and higher than the historical median. The right hand chart shows the historical range for new buildings and 10 year old secondhand container ships with a capacity of 2,500 TEU. Values are rebounding from their end of the year prices and remain stubbornly high compared to both historical average and median levels.

Speaker 1

At these price levels, we are reluctant to pursue further acquisitions unless they can be combined with charters that will reduce residual values at their expiration to levels below historical median. We feel very well protected against market volatility with a high concentrated revenue contract revenue coverage throughout 2024 2025 having already covered 70% 25% of our operating days, respectively, at very healthy rates. Our strong balance sheet will allow us to take delivery of the remainder of the containership new buildings, while keeping leverage low at around 60%. It will also allow us to now pay an increased dividend and execute on our stock repurchase program to continue rewarding our shareholders. Even after these actions, our liquidity could have further increased.

Speaker 1

We therefore continue to evaluate investment opportunities that may incrementally increase our revenues and growth potential. And with that, I will pass the floor to Tasos Livis.

Speaker 2

Thank you very much Aristides. Good morning from me as well, ladies and gentlemen. Over the next four slides, as usual, I will give you an overview of our financial highlights for the Q4 and full year of 2023 and compare those to the same periods of last year. For that, let's turn to slide 17. For the Q4 of 2023, the company reported total net revenues of 49,700,000 representing a 15.8% increase over total net revenues of 42,900,000 during the Q4 of 2022 and that was mainly a result of the increased average number of vessels we operated in the Q4 of 2023 compared to the corresponding period of the year before.

Speaker 2

The company reported a net income for the period of €25,300,000 as compared to a net income of €20,300,000 for the Q4 of 2022. Interest and other financing costs for the Q4 of 2023 amounted to $2,800,000 before deducting capitalized interest income of $300,000 earned from the self financing of the pre delivery payments for our newbuilding program for a total net interest and financing costs of $2,500,000 for the period compared to $1,600,000 in the same period of 2022 after deducting capitalized included interest income for that period of 400,000. Dollars This increase in our interest expenses is due to the increased amount of debt we carried and increasing the weighted average rate, soft rate that our bank loans paid in the most recent period compared to the period of the previous year. Adjusted EBITDA for the Q4 of 2023 increased to 33,000,000 dollars compared to $22,900,000 for the corresponding period in the Q4 of 2022. Basic and diluted earnings per share for the Q4 of 2023 were $3.58 and $3.56 respectively calculated on about 6,900,000 dollars basic and diluted weighted average number of shares outstanding as compared to basic and diluted earnings per share of $2.87 $2.86 respectively for the Q4 of 2022.

Speaker 2

Excluding the effect on the net income for the quarter of the unrealized loss and derivatives, the amortization of fair value of below market time charters acquired and the vessel depreciation on the portion of the consideration of vessels acquired with attached time charters allocated to the below market time charter part, the adjusted earnings for the quarter ended December 31, 2023 which have been $3.62 basic and $3.61 diluted as compared to adjusted earnings of $2.50 basic and diluted for the quarter ended December 31, 2022. Usually, security analysts do not include the above items in their published estimates of earnings per share. Let's now look to the right part of the slide and review the numbers for the corresponding 12 month period ending December 31, 'twenty three and December 31, 'twenty two. For the full year of 2023, the company reported total net revenues of $190,000,000 representing a 4% increase over total net revenues of $182,700,000 during 2022, again, mainly the result of the increased number of vessels we own and operated in 2023 compared to the year before. The company reported net income for the year of $115,200,000 as compared to a net income of $106,200,000 for 2022.

Speaker 2

Interest and other financing costs for 2023 amounted to $9,800,000 again before the capitalizing futures interest income of $3,400,000 earned, as I mentioned earlier, from self financing the pre delivery payments of our new building program for a total interest and other financing costs of $6,400,000 dollars compared to $5,100,000 for the same period of 2022, which was derived after deducting capitalized computed interest income for 2022 of €500,000 Again, this increase is due to the increased amount of debt that we had and the higher software rates that our bank loans had to pay as compared to the year before. Moving to the EBITDA figures, adjusted EBITDA for the 12 months of 2023 were CAD124 1,000,000 compared to CAD114.4 million during 2022, primarily the result of higher revenues as I mentioned earlier. Basic and diluted earnings per share for 2023 were $16.53 basic and $16.52 diluted calculated on about $6,900,000 basically diluted weighted average number of shares outstanding compared to basic and diluted earnings per share of $14.79 $14.78 per share respectively for 2022. Excluding the effect on net income for the year of the unrealized loss on derivatives, impairment loss, amortization of the below market time charters acquired, The vessel depreciation attributed to the below market charters acquired and gain on time charter agreement termination as well as gain on sale of vessel.

Speaker 2

The adjusted earnings for the year ended December 31, 2023 would have been $14.99 basic and $14.98 diluted compared to earnings of $13.23 basic and $13.21 diluted for the year before. As I mentioned before, analysts do not include those adjustments that we subtracted in the estimates of earnings per share. That's why we make we're making the adjustments. Let's now turn to slide 18 to review our fleet performance. We'll start our review by looking at our utilization rates first for the Q4 and then the full year of 2023 and compare it to the same periods of 2022.

Speaker 2

Starting with the Q4 of 2023, our commercial utilization rate was 100%, while our operational utilization rate was 99.5% compared to 100% commercial and 95.1 percent operational for the Q4 of 2022. On average, 19 vessels were owned and operated during the Q4 of 2023, turning another time charter equivalent rate of $29,704 per day compared to 18 vessels in the same period of 2022, earning on average $29,399 per day. Total operating expenses including vessel running expenses, management fees and other G and A expenses, but excluding drydocking costs were $7,923 per vessel per day for the Q4 of 2023 compared to $7,937 for the same period of 2022. If we move further down on this table, we can see the cash flow breakeven rate which takes also into account drydocking expenses, interest expenses and loan repayments. Thus, for the Q4 of 2023, our daily cash flow breakeven rate was $15,000 per vessel per day compared to $15,801 per vessel per day for the same period in the Q4 of 2022.

Speaker 2

Let's now look on the right part of the slide to review the same figures for the full year. During the entire 2023, our commercial utilization rate was 99.6%, while our operational utilization rate was 99.1% compared to 99.9% commercial and 98.4 percent operational for 2022. On average 18.25 vessels were owned and operated during 2023, earning an average time charter equivalent rate of $29,807 per day compared to 17.1 vessels owned and operated during 2022 earning on average 31 $1,964 per vessel per day. Total operating expenses, again including vessel running expenses, management fees and other G and A expenses, but excluding dry docking costs were $7,906 for 2023 as compared to $7,548 per vessel per day for 2022. Again, looking at the bottom of this table, we see the cash flow breakeven rate for the year, including drydocking expenses, interest expenses and loan repayments which for 2023 amounted to $14,186 per vessel per day compared to $14,508 per vessel per day for 2022.

Speaker 2

Finally, if we look at the very last line on this slide, we can see the common dividend that we paid expressed in dollars per day. For the Q4 of 2023 that amounted to about $2,015 per vessel per day, while for the full year amounted to $2,104 per vessel per day. Let's now move to Slide 19 to review our debt profile and our forward cash flow breakeven level. As of December 31, 2023, our total debt amounted to about €131,000,000 The chart shows our current debt repayment schedule for the next 3 years. In 2023, we made loan repayments totaling €68,98,000, a figure which includes a payment of €27,000,000 that was refinanced and balloons totaling €13,300,000 for 5 of our vessels, which remain unencumbered, raising the number of unencumbered vessels in our fleet to 7.

Speaker 2

In 2024 2025, our projected loan payments decreased to around $31,200,000 $18,100,000 respectively, with balloon due of in 2024 of €1,800,000 and in 2025 of €18,300,000 The point here regarding the cost of our debt, which carries another margin of 2.31%. Assuming a soft rate of around 5.31%, the cost of our senior debt stands as of December 31 of 7.62%. But including the cost of certain interest rate swaps that we have, this figure gets reduced to about 7.32% on average as about 15% of our debt is hedged at a soft rate of around 3.4%. I'd like to draw your attention now at the bottom of the slide where we present the level show the breakeven cash flow at a various levels. First, our EBITDA breakeven level is $8,643 per vessel per day, a bar that you see somewhere in the middle of the slide.

Speaker 2

In total, including interest and loan repayments, our projected cash flow breakeven level of our over the next 12 months is expected to be around $14,658 per vessel per day. To sum up our presentation, let's move to slide 20 to review certain highlights from our balance sheet. As of December 31, 2023, our assets include cash and other current assets, which amount to about €71,700,000 Advances that we paid for our new building program currently stand at about $85,400,000 as of December 31, 2023. And the book value of our vessels was $267,700,000 result in total book value of our assets of about $224,700,000 On the liability side, as I previously mentioned, we had debt standing at €131,000,000 equivalent to about 31% of the book value of our assets. The fair value of below market charters acquired is approximately €7,600,000 representing about 1.2% of our assets.

Speaker 2

And other liabilities stand at about €11,000,000 accounting for another 2.6% of our total book value of our assets. Regarding shareholders' equity, I would like to highlight 2 points. First, that as of December 31, 2023, our retained earnings turned positive, reflecting the profitability of the last 4 years, which erased the losses of the previous decade and this happened even after payment of almost 25 $1,000,000 of dividends during 20222023. And second, that the market value for our fleet surpasses its book value significantly. Utilizing the charter adjusted values for both our fleet and our new building projects, our estimated value of our fleet is about €337,000,000, thus about €70,000,000 more than its book value.

Speaker 2

This translates to a net asset value of about $352,500,000 for our company, which is equivalent to approximately $50.9 per share. Our share price yesterday closed at $34 which compared to our net asset value represents a substantial discount suggesting considerable appreciation potential for our shareholders and investors. And with those remarks, I would like to pass the floor back to Aristides to continue the call.

Speaker 1

Thank you, Tassos. Let me now open up the floor for any questions you may

Operator

Our first question comes from Tate Sullivan with Maxim Group. Please proceed.

Speaker 3

Hi, thank you. Good morning. First on the 20% dividend increase and I mean 2023 having a payout ratio of about 12 percent. Can you talk about how you evaluated increasing the 20% dividend? Did you look across the shipping sector at payout ratios?

Speaker 3

What made you comfortable given, I mean, the ability of your to get contracts on your 6 future new builds?

Speaker 1

I think the primary concern was that we want to offer our shareholders significant dividend yields. So we want to satisfy our shareholders. We thought with the increase in the share price going down to 5%, 6 percent dividend yield was not at the level that we like to see. We know that our payout ratio even today is low. We are keeping the excess liquidity in order to find opportunities to invest when the time is right.

Speaker 1

But at the same time, we really want our shareholders to be satisfied and to be getting more than they would be getting in conservative investments, bonds, stuff like that. So that was really the reason we did it. As we've said many times, we have ample liquidity that we are collecting through the charters that we have secured during the strong time of the market and we are trying to make optimal use of that.

Speaker 3

Great. Thanks, Gail. It was great to see. And then on the AG and Express and coupled with your comment of maybe holding off on acquisitions for now where given where asset values are, particularly with the increase in rates due to the Red Sea situation, how are you evaluating AGN Express, the 7,000 rate versus breakeven EBITDA level of about 8,600 scrapping versus future contract availability?

Speaker 1

Well, last year in our model we were assuming that we would be scrapping the AGN Express at the completion of the charter because we thought the market would be soft. But with this strengthening market, the 7,000 level, which is just above breakeven for this particular vessel that has no debt assigned and low operating expenses. We felt it is best to keep it because really we don't know how this market will develop. So we want to have the option of earning significantly more than what we can earn by selling the vessel today at scrap value plus a little bit. So that's the reason we are keeping it.

Speaker 1

It has an option positive option value for us and it's contributing just a little bit because the 7,000 is above the breakeven.

Speaker 3

Okay. Thank you. And last one for me, Tasos, is on the capital commitments for the new builds, including the ship delivered this current quarter. Can you give an update on the outflow for this current quarter and then the total capital commitments for all the new builds, please, if you can?

Speaker 2

I think the remaining 6 new buildings have, I believe, on the top of my head, some like €220,000,000 that we need to total contract price, of which about 65 give or take has been already paid. And we expect to finance 60% of the contracted price, that's about €130,000,000 So we have about, I believe, €30,000,000 of additional equity contributions to make. I made this calculation on top of my head, trying to subtract the vessel we took delivery already.

Operator

Our next question comes from Christopher Sacaglia with Artic Securities. Please proceed.

Speaker 1

Congrats

Speaker 4

another good quarter and definitely positive with dividend hike. It's Christopher Shaly, and I'll take I believe it was a different name that was told. Anyway, can you elaborate a bit on truckering discussions, both with regards to vessels coming over now and on the new builds, sort of how long durations can you get now and how do you sort of evaluate duration compared to rate level?

Speaker 1

Sure. Yes, we are already discussing the charter of our first newbuilding vessel to be delivered in April. Duration is between 1 and 2 years, 1 2 years. We are looking at the various offers that we have And we'll decide depending on the level of if we go for 1 or 2 years' time. So there is discussions there.

Speaker 1

There are discussions about a couple of ships that open up within the next month or 2 months or so, 4 periods of up to a year. We will see. I mean there is interest in the vessels that are coming up within the next couple of months and we are focusing on these vessels for the time being, but nothing to report yet.

Speaker 4

Okay. Great. And with regards to the comment you made in the report on potential accretive investment opportunities. Is this something is this sort of asset transactions or is it company or M and A or what are you seeing here?

Speaker 1

No, to be honest, it's individual vessel acquisitions at this stage primarily that we are looking at. We're looking at quite a few things, but there is again nothing to report. We need to feel comfortable about the deal before advancing.

Operator

Our next question comes from Clement Mullens with Value Investors Edge. Please proceed.

Speaker 5

Good afternoon. Thank you for taking my questions. I wanted to start by asking about the upgrades on the synergy in Puzan. You mentioned it will improve the vessel's performance by about 20%. And I was wondering, relative to the $1,600,000 price tag of the upgrades, could you provide some further insight on the expected ROI?

Speaker 1

We have taken the I mean the ship has completed its dry dock and we have data on the 1st month after the delivery of the vessel after the ship after the retrofits. The indications are that we are talking about 25% improvement in the performance. On our budgeted figures, we estimated that within 2 years we would have recovered the whole investment. It might be even sooner.

Speaker 5

That's very helpful. Thank you. My second question is market related. No one knows when disruption in the Red Sea will be over, but I was wondering, should that happen, how fast do you think the market would readjust once again?

Speaker 1

It takes a long time for markets to readjust on changes. So I think that even if things were to end tomorrow, it will take at least 6 months before we go back to normality. And I don't see it ending tomorrow. But generally, it takes time for the markets to readjust.

Operator

Thank you. Our next question comes from Poe Fratt with Alliance Global Partners. Please proceed.

Speaker 3

Yes. Hi, Aristides, Tassos. You've covered a lot of ground, but just I'm not sure you mentioned it, but could you just highlight whether on the dividend increase, will this be reviewed annually? Is that sort of something we should expect?

Speaker 1

Usually, I mean, dividends are reviewed quarterly by our Board. But the expectation, obviously, when we announced it is that this will continue throughout the year. I am not committing 100% that that will be the case, but we feel very comfortable that we will be able to continue for at least another year.

Speaker 3

Great. Thank you.

Speaker 1

Thanks.

Operator

Thank you. We have a follow-up question from Tate Sullivan with Maxim Group. Please proceed.

Speaker 3

Thank you for taking a follow-up. Maybe I apologize if I missed it earlier, but the Akanata bridge in the hall damage from last year is the $1,100,000 expense this Q4 on higher insurance related to that? And do you still have outstanding insurance claims related to the hull damage for the Akanata?

Speaker 1

Tassos, will you take that?

Speaker 2

Yes. I think we have collected a good number of the outstanding claims on Akinada. That's why our receivables, other receivables, if you look at our balance sheet, they've come down significantly this quarter. There might be some small things, but by and large, we have collected most of the insurance claims.

Speaker 3

And was that $1,100,000 charge tosses in 4Q for higher insurance related to the Akinada claims or is something separate?

Speaker 1

No, we indeed go ahead, Dassar.

Speaker 2

No, no, I don't I cannot relate to such a charge in Q4. Sorry, Steve. Some other operating income that you probably see in Q4 relates to G and X, some recoveries from

Speaker 3

G and Xpress. Okay. Understood. Okay. Thank you very much.

Speaker 2

Indeed, on G and Xpress on again sorry, Steve. On the GN Express, we collected a bit more than what we had assumed before and that's why you see that increase. We would try to be conservative in our estimates of what would be paid on the insurance and we did get a little more on the AGN Express claims, which is reflected on our Q4 figure.

Speaker 1

Yes, exactly. That's what I wanted to say. I think we got about $1,000,000 more than what we thought we would get from the insurance proceeds because as always we are very conservative when we budget such things.

Operator

Thank you. At this time, I would like to turn the floor back over to the CEO, Mr. Peters for closing comments.

Speaker 1

Thank you all for participating in today's conference call and we will be back to you with our Q1 results in 3 months' time.

Speaker 2

Goodbye. Thanks, everybody. Thank you for your questions. Thanks.

Operator

This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.

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Earnings Conference Call
Euroseas Q4 2023
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