Euroseas Ltd. (ESEA) Earnings Call Transcript & Summary

Thank you for standing by, ladies and gentlemen, and welcome to the Euroseas Conference Call and the First Quarter 2022 Financial Results. We have with us today Mr. Aristides Pittas, Chairman and Chief Executive Officer; and Mr. Tasos Aslidis, Chief Financial Officer of the company. [Operator Instructions] I must advise you that this conference is being recorded today. Please be reminded that the company announced its results with a press release that has been publicly distributed. Before passing the floor to Mr. Pittas, I would like to remind everyone that in today's presentation and conference call, Euroseas will be making forward-looking statements. These statements are within the meaning of the federal securities laws. 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 2 of the webcast presentation, which has the full forward-looking statement, and the same statement was also included in the press release. Please take a moment to go through the full statement and read it. I would now like to pass the floor over to Mr. Pittas. Thank you, sir, and please go ahead.

Good morning, ladies and gentlemen, and thank you all for joining us today for our scheduled conference call. Together with me is Tasos Aslidis, our Chief Financial Officer. The purpose of today's call is to discuss our financial results for the 3-month period ended March 31, 2022. Let's turn to Slide 3. Our income statement highlights are shown here. For the first quarter of 2022, we reported total net revenues of $45.4 million and net income of $29.9 million. Adjusted net income attributable to common shareholders was $26.8 million or $3.70 per share diluted. Adjusted EBITDA for the period stood at $31.1 million. Our CFO, Tasos Aslidis, will go over the financial highlights in more detail later in the presentation. We are indeed very pleased with the company's increased profitability which is, of course, a result of the extremely strong charter rates our vessels recorded during the first quarter of 2022. In this positive environment and with a robust earning visibility well into 2024, we believe our stock should be trading at much higher levels, given the value of these contracted revenues and the net asset value of the company. We believe these factors combined create captivating opportunities for us. Therefore, the company's Board of Directors approved the share repurchase program for up to a total of $20 million of the company's common stock to be used at management's discretion. The Board will review the program after a period of 12 months. Tariff purchases will be made from time to time from cash in open market transactions and prevailing market price or in privately negotiated transactions. The timing and amount of purchases under the program will be determined by management based upon market conditions and other factors. The program does not require the company to purchase any specific number or amount of shares and may be suspended or reinstated at any time in the company's discretion and without notice. At the same time, our increased profitability and charter coverage has allowed us to reinstate our common stock dividend plan, which ran consecutively from 2005 until 2013, but had to paused due to the negative markets experienced in the last decade. This plan rewards our shareholders without having to hold back our growth strategy, as we are paying out just a small part of our contracted revenues. In this respect, our Board of Directors has declared a quarterly dividend of $0.50 per share for the first quarter of 2022 payable on or about June 16, 2022, to shareholders on record on June 9, 2022. Despite the short-term rewards we have initiated for our shareholders, we do remain committed to further growth of the company. Therefore, continue to examine investment and other opportunities and we expect to remain a significant participant in the Feeder containership market as we grow our fleet. Please turn to Slide 4, where we discuss our recent chartering and operational developments. Motor Vessel Aegean Express charter was extended for approximately 36 to 39 months and $41,000 per day, beginning March 31. The Motor Vessel Synergy Oakland was fixed for a single voyage at $160,000 per day after a brief idle period as a result of the loss of the short-term charter of $130,000 per day that was to be performed before the 4-year charter, we had concluded at $42,000 per day. The charter subsequently missed its delivery date, therefore, this short-term charter was extended by approximately 30 days in April at $180,000 per day before it started its new 4-year charter, which it is currently doing. We are also pleased with fixture of our first 2 new building vessels ahead of the delivery date at $48,000 per day for a minimum period of 36 months each. Motor Vessel Gregos new charter will commence in March 2023 upon its delivery, while Motor Vessel Terataki new charter will commence in June 2023 upon the delivery of that vessel too. Regarding repairs and drydocking, EM Corfu underwent drydock during the first quarter, while the Akinada Bridge incurred some repairs after having lost some containers at high seas. Furthermore, Motor Vessel Synergy Oakland incurred about [Indiscernible] of 5 days of commercial off-hire in February '22 as discussed above. Please turn to Slide 5, where we discuss our fleet's growth strategy. Adhering to our plan to renew our fleet and expand our footprint in the Feeder sector, we continue focusing on the most commercially demanded vessel sizes. January 2022, we placed orders for 2 additional eco-design fuel-efficient 2,800 TEU newbuilding containerships at the combined price of about $85 million. And in May 2022, we exercised our option to proceed with the construction of 2 more sister vessels for a combined consideration of about $86 million. All 4 vessels will be constructed at Hyundai Mipo Dockyard in South Korea. The vessels are sister ships of the pair of vessels, which we have ordered in June 2021. And as I said, was just charted out. The 4 new orders are expected to be delivered between the fourth quarter of 2023 and the fourth quarter of 2024. In addition to this, we placed orders for 3 newbuilding vessels with a carrying capacity of 1,800 TEUs, which will also be constructed at Hyundai Mipo for a total consideration of approximately $102 million. The vessels are expected to be delivered during the first half of 2024, 1 in the first and 2 in the second quarter of the year. At the same time, we also scanned the market for secondhand vessels with long-term time charters in place at attractive acquisition prices, bringing the cost base of the vessel below historical average levels at the end of the charter. As previously announced at the beginning of May, we agreed to acquire M/V Emmanuel P, ex Seaspan Melbourne which had a charter rate of $90,000 per day until March 2025 and M/V Rena P, ex Seaspan Manila, which has a charter rate of $20,250 per day until April 2024 and subsequently based on the context index with a flow of $13,000 and a ceiling of $21,000 per day until February 2025. Both Intermediate sized container vessels have a capacity of 4,250 TEU and were built in 2005 and 2007 respectively. The vessels were acquired for a combined price of $37 million. I'm happy to say that M/V Emmanuel P was delivered to the company today in the morning. Whilst M/V Rena P is expected to be delivered sometime within June 2022. Both acquisitions have been initially financed with the company's own funds. Please turn to Slide 6, where you can see our current fleet profile. Euroseas current fleet is comprised of 18 vessels, actually, we should say 17 vessels, as Rena P will be delivered to us in June. Anyway, of these 18 vessels, 10 are Feeder containerships and 8 Intermediate container carriers. Euroseas 18 containerships, will have a carrying capacity of about 59,000 TEU and another average age of about 17 years. Slide 7 shows the 9 Feeder containership newbuildings with a total carrying capacity of 22,200 TEU that are expected to be delivered between 2023 and 2024. After the delivery of the newbuilding vessels, Euroseas fleet will consist of 27 vessels with a total carrying capacity of about 81,000 TEU. Slide 8 shows our vessel employment. As you may see, we have covered the 97% of our capacity in 2022, approximately 78% of our capacity in 2023 and almost 55% in 2024. Let's now turn to Slide 10 to review how the market has developed in the last decade. Rates were low -- charter rates were low across all segments until mid-2020 after the onset of the pandemic. Since then, charter rates have improved about 6x, posting 10 years historical highs. Despite the [Indiscernible] container rates that was registered during November and December of 2021, rates continued to climb to new highs in the first quarter of 2022. Although we've seen a slight correction in the last weeks for the Feeder sizes, we expect market fundamentals to be favorable throughout the year. Please turn to Slide 11 to go over some other market highlights. As we've mentioned, time charter rates across all segments have skyrocketed over the past 12 months, we have reached all-time highs. Alongside the increased time charter market, prices for second-hand vessels have also increased with the average second-hand price index up about 70% in Q1 '22 over Q4 '21. Price gains were most apparent to the Feeder segment with a guideline price of $2,750 TEU per year old. Vessel rising approximately 108% year-over-year to $56 million. During the last couple of weeks, we have seen some softer deals being concluded in the smaller Feeder sector. During the first quarter, the newbuilding index increased by about 2.4%. The sentiments of the newbuilding market continues to follow its upward trend, which is also reflected in the current containership prices which are holding at 5-year highs. The idle containership fleet as of May 9 stands at about 270,000 TEU or 0.7% on the fleet, and has remained around those level -- lowest levels in the last year. However, due to lockdowns in China, the trend seems to be repeating a little bit in the last few weeks. When China reopens, these idle vessels will also be, of course, probably reactivated. There have been no demolitions to date in 2022. The capacity of containerships to be scrapped is expected to be approximately 34,000 TEU by Clarksons. Scrapping price has remained high so far during the year and stands at around $660 per lightweight ton as of May 2022. Overall, the fleet has grown by about 1.1% year-to-date without, of course, accounting for the idle activations. As it stands, approximately 80% of the capacity ordered so far in 2022 has been alternative fuel capable, mainly LNG dual-fuel. While in 2021, just 22% of the capacity contracted was with alternative fuel capable. Please turn to Slide 12. Global growth is expected to slow significantly in 2022, largely as a consequence of the ongoing conflict between Ukraine and Russia, increased inflation pressures and the continuing lockdowns in China. In its latest report, the IMF lowered its previous normal GDP estimates from 4.4% growth to 3.6% for this year, and from 3.8% to 3.6% to 2023. The largest contraction is projected for Russia due to the sanctions, as well as European countries' decision to scale back energy imports. Charter expected slowdown in China, remains a key risk to grow and is affecting global supply chains. Most stimulus measures are likely to be employed in order to speed economic activity, where the strength of any rebound is uncertain, and we largely depend on scale of future COVID-related outbreaks and lockdowns. The IMF has also cut U.S. growth to 3.7% for 2022 and 2.3% of 2023, down from its January projections 4% and 2.6%, respectively for the U.S. As for emerging markets and developing economies are also generally for lower growth in '22 than in '21. From the developed economies, only Japan and ASEAN-5 are expected to do better that 2021. Looking at the containerized trade and according to Clarksons Research, demand is expected to grow by 3.2% in 2022 compared to 6.5% for the previous year. For 2023, we expect containerized trade demand to grow at a moderate pace of 3.5%. Rates and growth projections are being continuously revised as the effects of the lockdowns in China and geopolitical tensions between Russia and Ukraine and world growth and trade are being continuously reassessed. Please turn to Slide 13, you see the containership age profile and delivery schedule. As you can see in the Containership age profile chart located on the left side of the slide, we have a young fleet with a near 8% of sales being over 20 years old. However, the older vessels are mainly concentrated in the smaller classes in which our ships operate. The right-side side chart shows the delivery schedule of the current containership order book, which is expressed as a percentage of the fleet. The circle figures for 2022 to 2025, reflecting anticipated fleet growth before any scrapping and slippages. Currently for the total containership order book stands at 26.4% of the fleet and the majority of the deliveries are scheduled for the second half of 2024 onwards. Please turn to Slide 14, where we discuss our outlook summary for the containership market. As previously mentioned, the Ukraine-Russia conflict has contributed to this rising uncertainty and inflation, while continued Chinese lockdowns are causing delays in the easing of global supply bottlenecks. Supply demand analysis still suggests a firm market continuing in 2022. The short to medium-term outlook for the container sector remains positive with both congestion and trade disruptions likely to continue to provide support throughout the year, alongside a moderate fleet growth of 4%. In addition, the Chinese lockdowns are currently affecting local production levels, which could have a material implication if they persist, but could also transform to rapid recovery once the lockdowns end. These logistical bottlenecks are expected to remain in the near term. Longer-term though fundamentals are hard to predict and will depend on the interplay of first, what demand for vessels will be once transportation system disruptions ease. Second, the fallout of the Ukraine and Russia conflicted and its effect on world economic growth and containerized rate. Thirdly, the material supply pressure from 2023 onwards due to increased deliveries and easing of congestion and whether it will overtake demand growth. And lastly, the effect of new environmental regulations, which will probably result in further slow steaming by 2023, '24 and effectively removing capacity from the market. Let's move to Slide 15. The left side of the slide shows the evolution of 1-year time charter rates for containers with a capacity of 2,500 TEUs since 2010. As discussed, we're witnessing the highest charter rate in the last decade. According to Clarksons, as of the end of last week, the 1-year daily time charter rate for 2,500 TEU containerships stood at $76,000 per day. The right-hand side of the slide shows the historical pricing for the 10-year-old container ship with the capacity of 2,500 TEU, which has a current price of $56 million, and is the highest of over the last decade. There is no doubt that at some point, charter rates and prices have to correct as such high shipping costs threaten to the derail the world order of globalization. The astronomically high margins of today will no doubt give way to more rational markets once enough new vessels are built and conditions of trade normalize. Euroseas recognizes this fact and positions the company accordingly to take advantage of the opportunities presented by the current market, but also be prepared for the correction that will sometimes come. The company will continue growing when the right opportunities are spotted, but will maintain a strong balance sheet throughout to weather any storm that may come. And with that, I will now pass the floor to our CFO, Tasos Aslidis, to go over our financial highlights in further detail.

Thank you very much, Aristides. Good morning from me as well, ladies and gentlemen. As usual, I would now take you through the next 5 slides of our presentation and give you an overview of our financial highlights for the first quarter of 2022 and compare the results to the same period of last year. For that, let's turn to Slide 17. For the first quarter of 2022, Euroseas reported total net revenues of $45.4 million, representing a 217% increase over total net revenues of $14.3 million during the first quarter of last year. The company reported a net income and net income attributable to common shareholders for the period of $29.9 million as compared to a net income of $3.8 million and net income attributable to common shareholders of $3.6 million for the first quarter of 2021. Interest and other financing costs for the first quarter of 2022 amounted to $1 million compared to $0.7 million for the same period of last year. This increase is generally due to the increased amount of debt we pay and the increase in the weighted average LIBOR rate that we pay in the current period compared to last year. Adjusted EBITDA for the first quarter of 2022 was $31.1 million compared to $5.6 million for the same period in 2021 representing 455% increase. Please see the press release we issued yesterday for the adjusted EBITDA reconciliation to our net income. Basic and diluted earnings per share for the first quarter of 2022 were $4.15 and $4.13, respectively, calculated on 7.2 million basic and 7.3 million diluted weighted average number of shares outstanding compared to basic diluted earnings per share of $0.53 per share for the first quarter of 2021, calculated on about 6.7 million basic and diluted weighted average number of shares outstanding. Excluding the effect on the income attributable to common shareholders for the quarter of the unrealized gain on derivatives, the amortization of below market time charter acquired and the depreciation charged due to the increased value of the vessel acquired with below market price charter. The result for the quarter, we can be $6.71 basic and $3.70 diluted compared to adjusted earnings of $0.45 per share basic and diluted for the first quarter of last year, during which we excluded unrealized gain in derivatives and the loss on sale of a vessel. Usually, [Indiscernible] do not include the above items in the published estimates of earnings per share, that's why we present our earnings on per share. Let's now move to Slide 18 to review our fleet performance. Again, as usual, we will start our review by looking first at our utilization rates for the first quarter of 2022 and compare them to the first quarter of last year. Our fleet utilization rates are broken down into commercial operation. During the first quarter of 2022, our commercial utilization rate was 99.6%, while our operational utilization rate was 99.5% compared to 100% commercial and 96.7% operational for the first quarter of last year. On average, 16 vessels were owned and operated during the first quarter of 2022, aimed another time charter equivalent of $33,986 per day compared to 14 vessels in the same periods of last year, earning on average $12,134 per day. Our total operating expenses, including management fees, general and administrative expenses, but excluding drydocking costs, averaged $7,629 per vessel per day during the first quarter of this year compared to $6,914 per vessel per day for the first quarter of 2021. If you can move further down on this table, we can see the cash flow breakeven rate for the first quarter of 2022, which also takes into account in addition to the above, interest expenses, drydocking expenses and loan repayments, but excludes balloon payments. And for the first quarter of 2021 also includes preferred dividend payments. Thus, during the first quarter of 2022, our daily cash flow breakeven rate was $40,057 per vessel per day compared to $9,630 per vessels per day for the same period of last year with the difference primarily due to loan -- to increase loan repayments and dry bulk expenses. Let's now move to Slide 19. You should be familiar with this slide by now, as we use it since the same time -- this time of last year. This slide provides our shareholders and investors with a tool to assess the earnings potential of our fleet in the coming periods. The table shown in this slide is 2 parts. The first part refers to our already-in-place converts, the table shows the available days for hire of our fleet in each period and after making assumptions for the drydocking days expected, and also shows the number of contracted days, as well as the difference of the 2, what we call the remaining open days of our fleet. The table also shows the percentage coverage and the average contracted rate in each period. By making an assumption for the operating and G&A expenses and the drydocking cost, we can estimate first, the EBITDA contribution of the contracted portion of our fleet. To complete our EBITDA calculation for the entire fleet, we need to make an assumption about the other trade to be earned by our open days. Here, one could make his/her own assumptions. In [Indiscernible] if we assume that open days in 2022, 2023 and 2024, would earn another say equal to that of a contracted date in each period [Indiscernible], the EBITDA estimates shown at the bottom of the table. Furthermore, by knowing our open days in each period, we can easily calculate the sensitivity of our EBITDA to charter exchanges. Of course, as our contract coverage is very high, especially for 2022, which is essentially 100% in 2023, our EBITDA declines to market rate is minimal. Taken to the extreme is [Indiscernible] that even if all our open days earn nothing then our EBITDA for the next 2 years will still be over $125 million per year, and even for 2024, it would be over $105 million. Let's now move to Slide 20 to review our debt profile. On the top part of this slide, we can see or step beneath, current debt repayments over the next several years. Our loan repayment schedule with our balloons for this year stands at about $27.4 million, with our debt repayments of the current debt, as I mentioned, going down over the next 3 years. We saw higher balloon payments due in 2023, which we expect to be able to refinance, if chosen so. Please note that the shown debt profile does not include any debt that we expect to assume to finance our newbuilding program. A quick note on this slide on the cost of our debt as this is related to the loans outstanding at the end of the last quarter. The average margin of our debt is about 3% and assuming a LIBOR rate of 1.25%, our cost of our senior debt will be on average about 4.25%. If one includes the cost of our interest rate swaps, which are on average at about 1%, the overall cost is coming down a bit to about 4.17% for our existing debt. Looking at the bottom of this table, we can see our cash flow breakeven level expectation for the next 12 months in dollars per vessel per day. You can see the loan repayment that we just reviewed over the next 12 months are to make a $4,094 per vessel per day contribution to our cash flow breakeven level. You will make similar assumptions for the remaining components of our cash flow breakeven level, that is our operating expenses, G&A expenses, interest payments and high working costs, which can come with the cost below breakeven level for the next 12 months of just around $13,061 per vessel per day. Let's now move to Slide 21. This slide provides some highlights from our balance sheet, adjusted to reflect the market value for our fleet. As of March 31, 2022, on a book value basis first, our assets include cash and other assets of about $68.6 million and the book value of our vessels, including advances for the newbuildings and the acquisitions of the secondhand acquisition, giving us a total book asset value of about $241.8 million. On the right-hand side, we had an outstanding bank debt of $112.1 million and other liabilities of about $22.6 million, resulting in the net book value of our shareholder's equity of around $107 million. However, the market value for our fleet is much higher than its book value. We estimate that our vessels are worth more than [$170 million], inclusive for the appreciation of the value of the newbuilding contracts and adjusted for the negative value of certain of our charters. Thus, on a market value basis, we can calculate the net asset value of our fleet to be around $470 million or around $64 per share. Recently, our shares have been trading in the range between $24 and $29 per share, also representing a significant discount to our net asset value per share and hopefully good appreciation potential for our shareholders and good investment opportunities for our investors. And with that, I would like to close my presentation and pass the floor back to Aristides to continue the discussion.

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

[Operator Instructions] We take our first question.

Tate Sullivan from Maxim Group. Can we start just -- can you provide more details on your newbuild chartering strategy after you booked the Rena and Gregos well ahead of delivery, do you hope to replicate those types of contracts, those levels with the next 20 under deliveries? And is setting the contract 10 months to 13 months, well ahead of delivery, a much longer time line than historically, please?

So it depends on the market. If we are able to do it at similar levels, we think these are great levels. But then the next couple of ships comes up a little bit later than the first 2. So we'll have to wait for a few months before we are able to move on the other ships. These were the 2 prompter ships that we fixed. What will happen will really depend on the market if we are able to do these things going on for later.

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

Sure. We are repaying debt continuously. We will keep leverage contained. We do currently have the visibility on our earnings and our constructed earnings, which gives us a great assurance that we are very well covered for the following 3 years. So we don't have any fears for the next 3 years, and we want to take advantage of the opportunities that might appear, to continue growing the company and rewarding the shareholders.

And just back on the newbuilding strategy, if I might, might you take a staggered approach similar to what you have with your whole fleet before in terms of having a mix of shorter-term and longer-term contracts? Like the 3-year contracts you recently...

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

We will take our next.

It's [Paul Frank] from Alliance Global Partners. I had a couple of follow-up questions on just newbuilds. Can you highlight how much you spent in the first quarter on the newbuild program? And how much you're going to spend for the rest of the year? And then if you have numbers available for 2023 and 2024, that would be helpful.

I think in the first quarter of the year, we made the [Indiscernible] payments for the first 2 vessels we ordered. And I think we are in the process of making these initial payments. I don't -- one of our vessels have started being built yet. So the second payment will be made when the vessels start being built.

I think what -- we can send you afterwards the full schedule of payments so that you have a clear picture.

That would be really helpful. And then Aristides, on the dividend, you reinstated the dividend at $0.50 a quarter. Is that something that we should expect as far as a level over the next several quarters? Or how will you look at setting the dividend? is it a set formula or set amount?

No, we don't have anything set other than that we will be consistent, and we will be paying dividends going forward. We were perhaps not one of the first companies to reinstate the dividend because we wanted to pay a dividend when we know that we can comfortably continue the whole process for the years to come. And we feel comfortable that with the next 3 years where we have visibility, we will be able to be paying a dividend. What -- if that stays the same or increases, is something that remains to be seen and decided on a case-by-case basis on the next board meetings that we're going to have.

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

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

Understood. And then Tasos, you talked about financing the newbuilds. Is there a target level like 40%, 50%. That you be looking at financing the newbuilds as they -- to finance the delivery payment?

I think our main assumption is that the target is to finance about 60% of the contract price, so it may vary depending on the circumstances, for example, the first 2 vessels that we have already booked and long-term contract might be able to increase that leverage, so we haven't decided yet, but we might be able to and depending on the situation that when the time comes to finance its vessels, it might vary, but assuming 60% average is a safe assumption.

Okay. That's helpful. And then if we could talk about the -- you talked about planning for a potential downturn because of maybe uncertainty on the demand side, but more importantly, the expansion on the supply side, your forward cover book is very high. But you do have like the Akinada Bridge coming up in 2022 in November and Joanna in January of '23. And then 3 other ones in sort of the middle of '23. Can you talk about possibly great expectations at this point in time, whether you're in active discussions on those renewals? Just a flavor whether you're seeing any of the potential weakness impacting discussions at this point in time.

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

Okay. And it's interesting that you added on the dual fuel capability or the LNG fuel capability to your newbuild program, the costs went up a little bit. But what drove that decision? Was it a customer-driven decision? Or was it a corporate decision based on what you see the emission standards evolving?

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

The upgrade of the engines to Tier 3 is also part of our commitment to our environmental strategy.

Okay. And then over you...

This, we will always adhere by the laws and the environmental demands that are made on us. We believe in that, and we want to help in that way as much as we can.

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

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

And the next question.

This is [Indiscernible]. So just a couple of quick ones for me. One is on the dividend policy. What means to decide on $2, what was the calculation to get to the $2 annual dividend?

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

Okay. This is our fixed dividend, this is not a variable dividend, right?

The dividend will be discussed on the Board level at each quarter it's going to be.

Understood. All right. Because if I look at -- I know when you announced the dividend policy, there was close to 7%. And if I look at the comps globally, not just in the U.S., you guys are right about the middle. And if I look at your contracted earnings and based on my projections, it looks like there is capacity for the dividend to go up on -- based off of free cash flow, will just have operating cash flow. So -- when the Board meets to discuss the dividend in the future, what are some things that -- what are some factors that could help the dividend increase for the coming quarter? .

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

Great. Understood. And in terms of going back, I know we discussed this. But in terms of the newbuilds on order, I know that 24 ones are a little far out, but can you kind of let us know your thinking or targeting [50:57] when you would look to charge some of these vessels, would it be like if you look at the 2 that we delivered in the first quarter of '24, do those discussions start in the third quarter, fourth quarter or even sooner?

No. I think that you probably will not hear any news until towards the end of this year for the remaining newbuilds at the early.

And with your comments that the company saw weakness further out beyond '23, would it be fair to say that you will look for more multiyear charters for the vessels coming off charter in '23?

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

Okay. And one last question. So the order book overall looks manageable, but in the intermediate and the feeder, it's fairly high. Does that -- how worried are you about initial [Indiscernible] going to be delivered. And do you feel that those will be more replacement vessels with older tons being scrapped? Or do you really feel like this would be a net asset to the fleet and that's a push down rates as we move beyond.

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

And sir, I hand floor back to our CEO, Aristides Pittas for any closing remarks.

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

Thanks, everybody.

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