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Euroseas Ltd. (NASDAQ:ESEA)

Q2 2012 Earnings Call

August 9, 2012; 09:30 am ET

Executives

Aristides Pittas - Chief Executive Officer

Anastasios Aslidis - Chief Financial Officer

Analysts

Josh Canter - Deutsche Bank

Nick (ph) - Wells Fargo

Chris Snyder - Sidoti & Company

Operator

Thank you for standing by ladies and gentlemen and welcome to the Euroseas conference call on the second quarter 2012 financial results. We have with us Mr. Aristides Pittas, Chief Executive Officer and Anastasios Aslidis, Chief Financial Officer of the company. At this time all participations are in a listen-only mode. (Operator Instructions).

Please be reminded that the company (inaudible) their results after the market closed yesterday with a press release that has been publicly distributed. If you have not received the press release you may log on to Euroseas website at www.euroseas.gr and navigate to the Investor Relations page or you can call Capital Link at 212-661-7566 or the Chief Financial Officer of Euroseas, please request the press release details and we will be happy to send it to you.

For those of you who want to follow the audio webcast please look on to your computer to the homepage of the Euroseas website as I mentioned, www.euroseas.gr. Once again the participants of the webcast can download the PDF from the website. Kindly not the slides are user controlled.

Before passing the floor to Mr. Pettas, I would like to remind everyone that in today’s presentation and conference call Euroseas will be making forward-looking statements. These statements are within the meaning of the federal securities laws. The ones that are discussed, there may be forward-looking statements which are based on current management exceptions that involve risks and uncertainty that may results in such expectations not being realized.

I kindly turn your attention to slide number two of the webcast presentation, which has the forward-looking statements and the same statement was also included in the press release. I kindly suggest that you take a minute to go through the whole statement and read it.

Without taking any more of your time, I would now like to pass the floor to Mr. Aristides Pittas, Chairman and Chief Executive Officer of Euroseas. Please go ahead Mr. Pittas.

Aristides Pittas

Good morning and thank you for joining Euroseas for our conference call. Together with me today is Anastasios Aslidis our CFO.

The purpose of today’s call is to discuss the results for the three and six-month periods ended June 30, 2012. Let us turn to slide three for our 2012, second quarter and first half overview.

For the second quarter of 2012 we reported total net revenues of $12.8 million. Net loss for the period was $1.4 million or $0.04 per sale basic and diluted. The results for the second quarter of 2012 includes a $1.3 million net unrealized gain in derivatives and a $0.4 million net realized loss on derivatives.

Excluding the effect of the earnings for the quarter, the unrealized gains and derivatives and the realized loss on derivatives, the adjusted net loss for the period would have been $1.3 million or $0.04 per share loss, basic and diluted.

Adjusted EBITDA for the second quarter 2012 was $3.4 million. We declared a quarterly dividend of $0.02 per share for the second quarter of 2012, payable on about 7 September 2012; the shareholders of record on August 31, 2012. This is the 28th consecutive quarterly dividend declared.

Fro the first half of 2012 we reported total net revenues of $26.7 million. Net loss for the period was $10.4 million or $0.32 per share, basic and diluted. Excluding the effect of the losses for the first of 2012 of the realized loss on derivatives, realized gain on trading securities and loss on sale of a vessel, the adjusted net loss for the period would have been $1.4 million or $0.04 loss per share, basic and diluted.

Adjusted EBITDA for the first half of 2012 was $8.3 million. We declared two quarterly dividends during the first half of 2012 for a total of $0.06 per share.

Please turn to slide four. For the last seven years we have been aiming to declare a dividend, which would present an yield of between 5% to 12%. In view of the challenging market conditions and their desire to preserve cash, to take advantage of new investment opportunities, our board decided to reduce our quarterly dividend to $0.02 per share, which however still represents a healthy annual view of about 6.8% from the basis of our stock price of $1.17 on August 8, 2012. Our intention moving forward remains continuing our policy of providing healthy dividends throughout market cycles, without compromising growth opportunities.

Please turn to slide five to review our company developments. In regards to recent feed developments we renewed the samples for three of our container vessels in the second quarter for short durations, one of which at a slightly lower rate. During the first half of 2012 the container ship market remained depressed for the size of vessels we operate and stayed very close to the low levels last seen in the beginning of 2010.

Our strategy of employing our vessels on a short period cycles during market downturns has generally worked well for us in the past. It puts us in a position to capture upside in the freight markets and thus positively impact our revenues once this occurs. On the other hand the dry bulk market, although also depressed, did not affect our revenues during the second quarter of 2012 as our vessels have sorted well into 2015.

In regards to dry dockings, after the Panamax vessel from the List B was dry docked during late June and early July, we have just one dry docking remaining in 2012, which will be in the fourth quarter for one of our container ships.

Our current fleet is shown on slide six and consists of five dry bulk vessels, nine container ships and the multipurposes.

On slide seven you will find the recent developments within Euromar. Our joint venture with Eton Park capital and Rhone capital. We are very pleased with our asset purchases as we are able to purchase two container vessels in the first half of 2012 at very competitive prices. The second, the Cap Egmont came with a three-year charter and is about market accretive at the rate.

Euromar will continue looking for opportunities in both the container and dry bulk stage, as we feel that the level of the prices that we have currently reached will eventually provide superior returns to Euroseas and Euromar shareholders. Today Euroseas has contributed close to $90 million of our $25 million in commitments. In total, about $131 million has been invested by the partnership, leaving about $44 million for further acquisitions and other corporate methods.

On the following slide, slide eight, we list the Euromar fleet of 10 of them, mostly gauged intermediate and handy size containers, each with an average age of approximately 8.7 years and a total carrying capacity of 24,000 TEU.

Please turn to slide nine. The successful completion of the rights offering in the second quarter 2012 showed the support and faith in Euroseas from a big number of shareholders.

Friends, the Pittas family investment vehicle accounted for about two-thirds of the new sales. The offering was alone subscribed by about 5% or 630,000 shares. All in all, $13 million accounted for 52,094 shares were sold, raising approximately $14.9 million after expenses. The proceeds will be used together with other funds of capital disposal for further investments in the dry bulking container markets, as well as help provide further liquidity control versus the uncertain market outlook.

Let us move to slide 11 for a brief overview of the market. There are significant downside risks and political and economic uncertainties facing the world economy today. Although there is still growth in the US economy, we are seeing a steady decline in GDP growth this year.

With the unemployment rate also having increased from 8.2% to 8.3% during the previous quarter, we still have a long way to go before anyone can claim that the US economy will expand at a healthy rate, especially after the November elections. It seems that the pressure is mounting around the quantitative easing at some stage, to help the US economy to embark towards steadier growth.

Across the board, concerns for stability of the European economy are still quite significant. The elections in Greece, the possibility of Greece leaving the euro, Spanish banks weakness and unemployment, uncertainty about the new Franco-German relationship are all major reasons that can have devastating effects of the European cohesion and the euro as a currency. Time will tell if the defense mechanisms, which have been built up to now and are in the process of being built against the country member default and the political will of the governments and the people to keep Europe united will prevail up north.

Further adding to the negative atmosphere in the world economy is the talk of a Chinese harbor shop landing, which could further affect Brazil and other commodity exporters. All in all, there are some signs suggesting that the recent measures by China to reduce bank reserve requirements and promote further infrastructure work are proving quite successful.

As you can see in slide 12, the IMF has revised downwards its 2012 projections from the developing countries like China and India. IMF projections point to a 3.5% royal GDP growth in 2012 and changed from the previous quarter. For 2013 the IMF still predicts the euro zone to the world’s positive growth, but overall slightly less growth in the world economy in 2012 from 4.1% to 3.9%. The current IMF prediction and those of most other economies call 2012 as the inflection point of global growth, after which the world will start growing again at a healthier pace.

As I previously mentioned, GDP projections are strongly correlated with dry bulk and container rates. Current Clarkson’s projections point to dry bulk growth to remain to 4% 2012 and changed from previous estimates. On the other hand, Clarksons containerized rate growth focus in 2012 were lowered to 5.9% from the previous estimates of 7.6%, the weakness in the euro zone economies clearly impacting container freight growth.

As per 2013 the analysts predict a higher growth for the world GDP, a further improvement to dry bulk and container demand growth rates to 5% and 7.5% respectively can be expected, against this demand back down to help us to look at ship supply.

Lets turn to slide 15. The delivery schedule for dry bulk vessels at the beginning of the year stood at 22.7% of the fleet for the year. This does not take into account cancellations, slippage and scrapping. It is difficult to quantify how much of the order book finally gets delivered. In all probability it is going to be around 70% due to the poor market and the lack of finances in line with last year. However the yards will be strongly resisting owners requests as much as possible and many ships will be delivered from the original contractors.

For 2013 the current order book is at 8.5%, which is not too high, but we do expect some slips of the schedule to be delivered within 2012 to be scheduled for 2013, thus keeping extra deliveries in 2013 high too. Please note though, on the left hand side, that the percentage of the fleet that is older than 20 years is still very high at 13%. This will no doubt help the fleet to balance relatively quickly, by being scared as is already happening, if rates remain low for the next 12 to 18 months.

Lets turn to slide 14. The container ship order book for 2012 deliveries is more than half that of dry bulk in percentage terms and much lower than what has been historically. This order book is heavily skewed towards the larger size ships. The significant number of placed orders in 2011 is nearly all for bigger ships too and will be delivered in 2015 onwards. As further significant new orders have not been placed, the market should be in a position to absorb them.

If this ordering trends here was to revive growth, it would put the break on the market a few years down the line; however, the current slowdown of the contents of the market will probably result in the continuation of this significant decrease in new orders for at least the ensuing six to nine months, thus assisting the long term prospects of the market.

The delivery schedule for 2012 stands at 9% and just as in the supply of dry bulk vessels, the large vessels dominate the order book, while the small ships where we are active actually lot expect the trade growth. However, the cascading effect is already being felt by smaller ship owners, helped also by the higher fuel prices.

Cancellations, slippages, conversions and scrapping will bring the actual supply growth down. Operational matters since the (inaudible) will also reduce the actual effect of the fleet growth.

So lets turn to slide 15 to summarize our views on the dry bulk market. Significant deliveries are expected for the remainder of 2012 and likely into 2013, despite performance and cancellations. The fleet will grow rapidly despite a high level of scrapping tool.

Slower Chinese growth is somehow dampened by Japan’s recovery after the tsunami and the consequent move away from nuclear availability. Even assuming healthy scrapping and delivery cancellation rates, we think that for 2012 and the most part of 2013, the market will remain under pressure.

On the container market we have seen that the economic uncertainty and increasing doubts within the euro zone has negatively affected containerized fleet growth today. On the supply side, fleet growth is expected to be significant, but less than the last couple of years. As all other dimensions, supply growth is mainly in the large size segments and together with high fuel prices which is giving rise to a significant cascading effect, not only in the east, west rates, but also in the north, south rates.

The link of supply in the fleet sizes we operate and the need for giving many freights could provide effective protection from the possible August supply demand sizes. Additionally we expect our intermediate size ships to cascade down to the smaller feeder sector, thus picking up power through their freight as well.

It seems the supply and demand will be relatively balanced for the remainder of this year and next, implying a relatively stable market, but unfortunately stable at current very low levels, like at least till the second quarter of next year.

On the medium term we expect that the higher box rate line of companies have been able to pull through to restore them some profitability and thus positively affect the markets. Adding to the fact that very few new orders are being placed, there is hope that towards the end of 2015 we could see a significant recovery.

Based on our above described assessment of our market, lets see how we have adopted our strategy. Please turn to slide 17 to discuss our dry bulk component in many details. Our dry bulk fleet is fully covered for the entire 2012. We therefore expect to see no influence in our earnings from the developments in this market this year. For 2013 our coverage is 43%, with six opening up gradually over time.

Lets turn to slide 18. As far as our container ships are concerned, following the recent charter removals for three of our container ships, we currently have about 3% coverage for the remainder of 2012.

As I mentioned previously we are employing our vessels in certain charters, because of the weakened conditions in the market, so we can be able to take advantage of future offerings. We believe that the remainder of this year will be quite tough and we will be happy if we are able to renew vessels that open up at similar levels to existing charters for periods up to Q2, 2015, when we would hope to see charter rates pick up again.

Please turn to slide 19. Through Euro bulk of manager we have been able to continue to keep our costs very low. The graph on this page compares our daily costs, excluding dry docking expenses.

Overall our costs are amongst the lowest of the public shipping companies. We are very proud of this performance, especially if it is in conjunction within a professional fleet utilization in excess of 98.5% over the last five years, a level similar to that of our peers, despite the fact that the average age of our fleet is higher than most of the other listed companies. The second quarter of 2012 is in line with the first quarter and the fiscal year of 2011 and also our 2012 budget.

Lets now turn to slide 20. The left side of the slide shows the correlation of time charter rates for Panamax dry bulk ships and container ships of 1700 TEUs over the last decade. Earnings for container ships were moving in parallel earnings for Panamax ships with the exception of the peak in 2004, which was a play (ph) of the super cycle that was following dry bulk from 2006 to 2008.

From 2006 to 2010, dry bulk significantly out performed the container ship market due to the Chinese demand boom, but the two markets finally conversed again. After the small spike we saw in dry bulk rates during the end of 2011, the market seemed to be converging again.

The right hand side of slide 20 shows current values in the relation to historical prices. Dry bulk second hand asset prices are correcting quickly to match what’s happening on charter rates. We are below historical average values, but we think they may have just a bit further south to go. Container ship values have been weakening over the last few months and they are again testing pre historical lows.

As explained on numerous occasions, we are generally comfortable investing at levels around historical average or lower. Indeed our modeling shows us that we can reach significant mid-year terms by investing in either of the two sectors today. The issue however in our mind is no different investment today we go after, but if by waiting a bit further, even more lucrative opportunities may appear. We are continuously evaluating all opportunities, both directly and via our Euromar joint venture, with the aim of pulling the trigger at the right time and for the right project.

With that, I will pass the floor over to Anastasios to take you through our key financials in a bit more detail.

Anastasios Aslidis

Thank you very much Aristides. Good morning ladies and gentlemen from me as well. I will now provide you with a brief overview for our financial results for the three and six month periods ended June 30, 2012 in the (inaudible) as we did in previous presentations.

Lets move to slide 22, which shows our second quarter and first half 2012 results in comparison to the same period of 2011. I will repeat here, some of the fugues Aristides gave you at the begging of the presentation.

For the second quarter of 2012, we reported total net revenues of $12.8 million, representing an 18.1% decrease over total net revenues of $15.6 million during the second quarter of 2011. We reported net loss for the period of $1.4 million or $0.04 per share base diluted, as compared to net income of $0.00 million and $0.00 per share base diluted for the second quarter of last year.

The results for the second quarter of 2012 include the $0.3 million net unrealized gain on derivatives and the $0.4 million net realized loss on derivatives and trading securities as compared to $0.6 million net unrealized loss on derivatives and trading securities and $0.2 million realized loss on derivatives for the same period of 2011.

Excluding the effect on the earnings for the quarter of the unrealized gain on derivatives and the realized loss on derivatives too and trading securities, the adjusted loss per share for the quarter ended June 30, 2012 would have remained unchanged at $0.04 loss per share, basic and diluted, compared to net income of $0.00 per share basic and diluted for the quarter ended June 30, 2011. Our adjusted EBITDA for the second quarter of 2012 was $3.4 million, compared to $5.0 million achieved during the second quarter last year.

As Aristides mentioned earlier, we declare a quarterly dividend of $0.02 per share for the second quarter, payable on or above September 7, 2012, to our shareholders of record on August 31. This is the 28th consecutive quarterly dividend declared.

If we move now to the right part of the slide, for the first half of 2012 we reported total net revenues of $26.7 million, representing a 10.5% decrease over total net revenues of $29.8 million during the first half of last year. We reported a net loss for the period of $10.4 million or $0.32 per share, basic and diluted, as compared to net loss of $0.6 million or $0.02 per share for the first half of 2011.

The results for the first half of 2012 include a $0.4 million net unrealized gain on derivatives and trading securities, a $0.8 million net realized loss on derivatives and trading securities and a $8.6 million loss on sale of a vessel as compared to a $0.1 million net unrealized loss on derivatives and trading securities and $0.4 million realized loss on derivatives for the same period, the first half of 2011.

Excluding the effect on the losses for the first half of 2012 of the unrealized loss on derivatives, realized loss on derivatives, realized gain on trading securities and loss on sale of vessel, the adjusted loss per share for the six-month period ended June 30, 2012 would have been $0.04 per share basic and diluted, compared to a loss of $0.04 per share basic and diluted for the same period of 2011. Adjusted EBITDA for the first half of 2012 was $8.3 million, representing a 4.8% decrease from the $8.7 million we achieved in the first half of last year.

Lets now move to slide 23. This slide shows our fleet performance for the three and six month periods ended June 30 and compares it with the same numbers from last year. We have broken down our fleet utilization rate into commercial and operational.

The second quarter of this year we reported 99% commercial utilization rate and the 99.5% operational utilization rate as compared to 98.6% commercial and 99.9% operational for the same period of last year. The utilization rate does not include vessels in layout or schedule repairs during the reported periods.

In the second quarter of 2012, we operated 15 ships on average, earning a time charter equivalent rate of $9,757 per vessel per day, representing a decrease of about 15% compared to the time charter equivalent rate of $11,302 per vessel per day we achieved in the same period of 2011, during which we operated 16 ships on average.

In the second quarter of this year our total vessel operating expenses, included G&A expenses averaged about $6,073 per vessel per day, compared to $6,066 per vessel per day for the same period of last year if there is more increase.

General and administrative expenses during the second quarter of this year increased marginally on a per vessel per day basis as compared to the same period of 2011, an increase that was offset by a decline in the vessel hiring expenses.

Our dry dockings expenses in the second quarter of this year were used as compared to the second quarter of last year, as we kept one vessel starting undergoing dry dockings in the second quarter. We believe that we continue to maintain one of the lowest of the rising cost structures amongst the public shipping companies and we think this is one of the our main competitive advantages that we get.

I would like now to turn your attention to the boom of this table, to our daily customer breakeven level for the quarter, expressed again on $1 per vessel per day basis. We reported in the second quarter of 2012 in operating breakeven level, which includes low under payments of approximate $9,108 per vessel per day, as compared to approximately $12,250 per vessel per day for the second quarter of 2011.

Moving now to the right part of this slide, for the first half of this year we reported 93.3% commercial utilization rate and 99.5% operational utilization rate as compared to 98.3% commercial and 99.7% operational for the same period of last year. Again, the utilization rate does not include vessels in lay-up or scheduled repairs during the reported period.

In the first half of 2012 we operated 15.42 ships on others, earnings a time charter equivalent rate of $12,431 per vessel per day, representing a decrease compared to the same period of last year, during which we had a time charter rate of about $11,198 per vessel per day.

In the first half of 2012 our total vessel operating expenses, again including G&A expenses, operated at about $6,027 per vessel per day, compared to $6,002 per vessel per day for the first half of 2011 if there is more increase of less than 1%.

Our dry dockings expenses in the first half of this year were significantly lower as compared to last year for the same reason that we had only one ship starting undergoing dry dockings as I mentioned earlier.

In the first half of 2012 we hope to report and operate in breakeven levels, which again includes low underpayments of approximate $9,315 per vessel per day compared to approximate $9,797 per vessel per day for the first half of 2011.

Lets now move up to slide 24. This slides shows the expectation of our customer breakeven over the next 12 months on the right side, and on the left side also shows our scheduled debt repayments, including balloon payments.

As you can see from the chart on the left side, in 2012 we had a relatively low level of debt payments of around $11 million, excluding balloon payments and the same low level of debt repayments we had for 2013, this is the red part of the charts, again excluding balloon repayments.

In the first (inaudible) the balloon of $2.2 million in the first half of 2012. for the next 12 months we are scheduled to make about $11 million of debt repayments plus a balloon payment for $1.9 million out of the $9.9 million shown in the chart for 2013, which result in a contribution to our daily breakeven customer level of $2,400 as its shown on the right part of the slide.

After making appropriate assumptions for the other elements of our customer breakeven the operating expenses, G&A in dry dockings, we come to the next level of our customer breakeven level for the next 12 months of around $1,500 per vessel per day on a fully operationally basis. We do not include these figures, any credit to any (inaudible) which of course will reduce our breakeven level for that one.

As usual, let me conclude on slide 25 by giving you some highlights from our balance sheet. As of Jun 30, 2012, we had unrestricted cost of about $39.4 million and restricted cost of about $8.8 million. Our debt, including the current portion of it was about $6 million to $7.1 million, resulting in a debt to capitalization ratio of about 24%. The ratio of our debt to the market value of our fleet where it may stand between 62% and 65% and our net debt, which is debt to raise the capital is just around 18%. As a result of our low debt levels, we are in compliance with our loan covenants.

Looking forward, we estimate that we can allocate $25 million to $35 million of our cash for further expansion of our fleet and that includes (inaudible) as Aristides mentioned earlier, directly on our own or through our Euromar joint venture.

And with that, let me pass the floor back to Aristides.

Aristides Pittas

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

Question-and-Answer Session

Operator

Thank you sir. (Operator Instructions). And our first question comes from the line of Justin Yagerman from Deutsche Bank. Please go ahead.

Josh Canter - Deutsche Bank

Hi good afternoon. This is Josh Canter in for Justin.

Aristides Pittas

Hi Josh.

Josh Canter - Deutsche Bank

I just kind of wanted to start off with the container ships and rechartering expectations. I know you mentioned potentially lower rates, but this is a seasonally week time of the year. Can we see rates go down below operating expense levels?

Aristides Pittas

We can see rates, yes we can see rates going down to operate cost levels. Its very difficult to call the market, but definitely our thoughts right now are that its going to be a tough period till the end of this year, beginning of next one, till the next, lets say Chinese New Year. So we don’t expect any significantly recovery. If it comes it will be a bonanza that we are not expecting.

Josh Canter - Deutsche Bank

Got it, and so does that mean we should be expecting to read I guess another around of three month or six month charters.

Aristides Pittas

Yes, of course. I mean, we do not intend to fix into longer terms, of course because obviously these are rates that we are not making money off; we just covering operating expenses. So at some point the markets will turn and we want to ready to capitalize from that.

Anastasios Aslidis

Of course it’s the low markets, not always your choice, the length of the charter you have to contact. So we will try to keep it short to have the options opened, but we might not be able to.

Aristides Pittas

No, I think we probably will. Even the charters don’t feel comfortable today about doing too long charters.

Josh Canter - Deutsche Bank

Got it. Interesting color. As far as acquisitions go, so far you’ve been, I guess timing the market pretty well, holding off any sort of acquisitions for the past maybe a year or so at USDs and I guess I saw a continued pessimism in both sectors. I guess you have any sense on timing, before maybe asset prices start to look more attractive. Are we going to need to see a turnaround in the market or just kind of wait out the current dry bulk cycle a little bit further?

Aristides Pittas

I think that because prices are already at very low levels, one has to be careful not to wait too much, because as soon as we see the market turning and there is light in the tunnel we will see prices increase I think quite dramatically, especially for the younger ships. So one might loose some opportunities.

On the other hand, as we said we think things will be relatively bleak during the remainder of this year. So we are not loosing an opportunity by waiting for a few months more. This is something that we constantly evaluate and as I said, although our models show that they need investments that we were to do today, would give us an immediate term, very profitable returns for the specific project, but in the short term, there would be change. So think we can wait a little bit more before we invest.

Josh Canter - Deutsche Bank

With regard to the dividend, it’s not at $0.02. Cash flow generations been a bit strange with some of the week grades. I guess how should we think about the current dividend at $0.02 and I guess the company will be comfortable paying, I guess drawing down some of its cash balances, but can we see this cut down to a penny if it still remains week.

Aristides Pittas

Well, this is something that the Board discusses, at every Board meeting and based on the environment and the expectations at the time, so its difficult to tell you ahead of time what the dividend will be next quarter.

But the company has clearly achieved over the last seven years to its goal of smoothing the cycles, lets say for the investors and paying out dividends, which are relatively helping in terms of yield at any point in time. So the yields have always doing this last seven year, between 5% and 12% and I hope that this is something that will continue.

Anastasios Aslidis

Well, a part of the reduction of the dividends are typical to the prior number of sales. Shareholders got an opportunity to buy an extra share for the fraction of its price or they get extra cost from the extra sale.

Josh Canter - Deutsche Bank

Okay understood. All right, well I appreciate your time guys.

Aristides Pittas

Thanks Josh.

Operator

Thank you. Your next question comes from the line of Michael Webber from Wells Fargo. Please go ahead.

Nick (ph) – Wells Fargo

Hi, this is Nick in for Mike. How are you guys?

Aristides Pittas

Fine Nick.

Nick (ph) – Wells Fargo

Good. First I wanted to ask you about potentially expanding the euro mark JV and when that potentially could happen.

Aristides Pittas

We are talking to our partners and there is a sincere interest from them to do more as well. But as we still have these $44 million, we are waiting to invest that money or the bigger portion of that money, because we have also there keeping some of it to cover the potentially low market that we will be seeing within the next 12 months or so. So we are not going to be spending it all, unless we see the market turning a little bit.

But we want to complete those two or three investments that we will be able to do with the remaining money we have available and I’m pretty sure that by that time we’ll be ready to pour more money into that joint venture or something very similar.

Nick (ph) – Wells Fargo

Sure. Any guidance on how much additional money you’d be willing to put into that joint venture.

Aristides Pittas

How much Euroseas would be willing to put into that joint venture, right?

Nick (ph) – Wells Fargo

Yes, correct.

Aristides Pittas

That really depends on the opportunity that we might decide to do on our own. As Anastasios said, we have about $25 million to $35 million that we think at some point we will be able to invest and if we do it through a euro market, a euro mark two or on our own, its still very much open.

Nick (ph) – Wells Fargo

Okay, got it and also just wanted to get some guidance on the types of vessels you are do looking to acquire, with the cash from the rights offering and also Euromar more towards dry bulk or in containerships.

Aristides Pittas

I think, while it should not be taken for granted, because opportunities arise all the time, the current thinking is that if you were to do something on containerships, it probably would be done through Euromar and if we were to do something in dry bulk it would done through Euroseas.

Nick (ph) – Wells Fargo

Okay, thank you. I think that covers it from me. I’ll turn it back over.

Aristides Pittas

Thanks Nick.

Nick (ph) – Wells Fargo

Thank you.

Operator

Thank you. Your next question comes from the line of Chris Snyder from Sidoti & Company. Please go ahead.

Chris Snyder - Sidoti & Company

Good morning gentlemen.

Aristides Pittas

Good morning.

Anastasios Aslidis

Hi.

Chris Snyder - Sidoti & Company

So slippage in the dry bulk market has been pretty steady the past couple of years. They were around 35%. I was wondering if guys saw any reason to think that this will change over the next year or two.

Aristides Pittas

I think that 2012 will probably be at similar levels. These are the inductions that we’ve seen for the first half of this year and we think that the second half will follow that path.

In 2013 slippage will probably be less I think than what it is today, because the yards all have the capacity to do the ships and of course there is the difficulty in financing for many owners.

But as we’ve seen recently, the shipyards tend to get position of the ships and sell them into the market on their own in some cases. So this could be something that happens more in 2013 and therefore the actual slippage will be perhaps less in 2013 than what it will be this year. That’s our current thought right, on this subject to many things that can change.

Anastasios Aslidis

But clearly, its an element that we are watching very closely, I mean observing what is happening to be able to understand the tends.

Chris Snyder - Sidoti & Company

Yes, another question on the container side. Is there any sort of like specific catalyst in that market that you guys are kind of looking for and waiting to say that maybe if it were to happen then you guys would maybe try to extent some of these charters for a longer time or any like catalyst you can go and try to break them.

Aristides Pittas

I think the thing to follow is the number of laid out ships. When you see that figure diminishing, of course it creates some hope that the market is beginning to balance itself and you can expect higher charter rates. But right now its pretty steady at around 2.7%, 2.8% of the fleet and we need to wait and see the direction that this takes.

Chris Snyder - Sidoti & Company

Yes, is there anything on demand side that you guys – I mean you guys, obviously you know about the GDP, but is there anything like you guys are looking at typically on the demand side.

Aristides Pittas

On the demand side, the important thing is what happens in Europe and it actually is negative GDP growth that we expect in Europe for this year, actually comes around next year and becomes positive. That would be a positive if that was to happen. That would quickly I think push demand back for the main freight and that always flows down to the other sectors.

Anastasios Aslidis

A big part of the shipping demand is due to Euro, because the call is long for this Europe and the amount of demand is high. So if Europe is not doing well, I think its inevitable that the condensed market will stumble.

Chris Snyder - Sidoti & Company

Do you guys have a number on what percent of the container ship trade ends up in Europe, is delivered to Europe.

Anastasios Aslidis

We don’t have these numbers handy, but we will be happy to provide with...

Aristides Pittas

Yes, I don’t have the number off hand and I don’t want to say a number, but we can send that to you.

Chris Snyder - Sidoti & Company

Okay, thank you. That’s if from me. I really appreciate you taking the time to answer my call. Thanks a lot guys, it helps a lot.

Aristides Pittas

Thank you. Bye.

Operator

Thank you. (Operator Instructions). Since we have no further questions gentleman, I would like to pass the floor back to Mr. Pittas and Mr. Aslidis for any closing remarks. Thank you.

Aristides Pittas

Thank you all for listening into this conference call. We will be with you on your next scheduled call in three months time. Good-bye.

Anastasios Aslidis

Good-bye everybody.

Operator

Thank you ladies and gentlemen. That does conclude our conference for today. Thank you all for participating and you may now disconnect.

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