EuroDry Ltd. Common Shares 2026 Q2 Earnings Call

Good morning, ladies and gentlemen, and thank you all for joining us today for our scheduled conference call. Together with me is Ms. Athina Attalioti, our Finance Manager. The purpose of today's call is to discuss our financial results for the three and six-month periods ended June 30, 2026. For that, please turn to slide three of the presentation. Our financial highlights are shown here. For the second quarter of 2026, we reported total net revenues of $17.7 million and net income attributable to controlling shareholders of $6.59 million, or $2.32 per diluted share. Adjusted net income attributable to controlling shareholders for the quarter was $6.95 million, or $2.44 per diluted share. Adjusted EBITDA for the quarter was $11.71 million. Please refer to the press release for the reconciliation of adjusted net income and adjusted EBITDA.

Athina will go over our financial highlights in more detail later on the presentation. Since initiating our 10 million share repurchase program in August 2022, we have repurchased 358,130 shares of common stock in the open market for a total of $5.8 million. Our board reapproved the program recently and approved and extended finally. The most recent authorization was granted earlier this month and runs for another year. We will continue to execute repurchases in a disciplined, measured manner based on market conditions and other capital allocation priorities. We are also pleased to announce that on July 28, 2026, we signed a term sheet to refinance the MV Ekaterini, one of our Kamsarmax vessels, with a $19 million loan facility, higher by almost $8 million over the existing balance of the loan, further boosting our liquidity.

This agreement is subject to customary closing documentation. Let's now move to slide four. In that slide, we outline our chartering and operational developments. In the second quarter, we continued to deploy our fleet with flexibility. Four of our vessels are currently operating on index-linked charters tied to the average Baltic Supramax S10TC index, which provides direct exposure to market conditions, while, as I mentioned, maintaining operational flexibility. Our remaining vessels are employed on fixed trade time charters with most having durations of one to three months. The exception is our vessel MV Christos K, which is fixed on a longer-term charter to November 2026. Further charter details are provided in the following slide. In the second quarter, we entered into four rate agreements.

On November 19th and on March 30th, we sold two 90-day Kamsarmax 82,500 dwt average contracts for the third quarter 2026 at $17,250 and $17,100 per day respectively, each equivalent to one vessel. These contracts I mentioned are based on the Kamsarmax 82,500 dwt index, which averages five major time charter routes and proves a good hedge on our market exposure. Similar contracts for the second quarter of 2026 were settled very close to the rates agreed in the FFA contract. The final point on this slide is that operationally, we had no idle periods for the quarter, commercial or dry dockings during the second quarter. Let's move to slide five, which provides an overview of our fleet. Today, we operate a fleet of 11 vessels with total carrying capacity of approximately 766,000 deadweight tons and an average age of around 13.8 years.

In addition, we have four newbuildings on order. Two Ultramax vessels are scheduled for delivery in the second and third quarters of 2027, each with capacity of 635,000 deadweight tons. We also have two Kamsarmax vessels on order, scheduled for delivery in the first and second quarters of 2028, each with capacity of 82,000 deadweight tons. Upon delivery of these four vessels, our fleet will grow to 15 vessels with a total carrying capacity of approximately 1.06 million deadweight tons, including a Ultramax segment of eight vessels, a Kamsarmax segment of four vessels, all five of these vessels being eco-friendly ones. We are continuing sailing our three legacy Panamax, which are all three Japanese-built. Next, let's move to slide six, where we show our fleet employment profile.

Our current fixed rate covers for the remainder of the year stands at approximately a little more than 25%, based on existing charter arrangements. This excludes our four vessels operating on index-linked charter. Let's now move to slide eight to review key market developments for the second quarter and recent trends through late July. Panamax rates averaged $17,969 per day in the second quarter and has moderated slightly to $17,150 as of the end of last week. On the time charter side, one-year time charter rates have also strengthened. Clarksons set the standard Panamax one-year time charter rate is approximately $17,175 per day as of July 31st. Notably, time charter rates are now trading in line with spot market levels, reflecting continued confidence in the underlying market outlook.

During the second quarter, the Baltic Dry Index and the Baltic Panamax Index recorded year-over-year increases of approximately 78% and 54%, respectively, reflecting the strengthening of the dry bulk trade market compared to the second quarter of last year. If we now turn to slide nine. Here we review the global macroeconomic backdrop and its implications for dry bulk shipping demand. According to IMF July- Please stand by, everyone.

Thank you, operator. Apologies to everybody for the interruption. I'm going to pick up my presentation. I believe we dropped the line on slide nine. Here, we review the global macroeconomic backdrop and its implication for dry bulk shipping demand. According to IMF July 2026 World Economic Outlook update, global growth is projected to slow to 3% in 2026 before recovering to 3.4% in 2027, broadly unchanged cumulatively from April's forecast. The world is navigating several competing forces. On the one hand, we have elevated energy prices continuing to push inflation and interest rates higher, while AI-driven investment is supporting growth for countries integrated into global technology value chain. Meanwhile, global disinflation has stalled with inflation shock pushing the yield of the 10-year US Treasury to approximately 4.7%.

Geopolitical developments, mainly the Iran conflict and the continuing Ukraine-Russia war, have led to increased and volatile energy prices and created inflationary pressures which, in turn, might lead to higher interest rates. In the overall context, the U.S. economy has remained comparatively resilient. In its July 2026 economic outlook dimension, the IMF maintains its U.S. growth forecast at 2.3% for 2026 and revised its 2027 forecast upward to 2.2%. China is projected to grow 4.6% this year, supported by front-loaded public infrastructure investment and a surge in high-tech manufacturing and in exports. The ASEAN-5 region is projected to slow to 4.1% in 2026, down from 4.5% in 2025, before recovering to 4.3% in 2027, while a level China's growth is now expected to reach.

As far as global trade goes, world trade volume growth is projected to slow from 5%, the overall trade, in 2025 to 3.5% in 2026, before recovering to 4.3% in 2027. This moderation reflects the unwinding of earlier front-loading effect of tariffs and the continuing impact of tariffs on trade. The recovery in 2027 reflects a gradual adjustment as these dynamics gradually normalize through trade diversion, rerouting, and the continued expansion of technology-related trade flows. Looking specifically at the dry bulk sector, Braemar projects ton-mile growth at 3.8% in 2026 and 1.8% in 2027, reflecting continued expansion in global commodity trade despite the challenging macroeconomic vector. Let's now move to slide 10, as we can review the current state of the dry bulk order book. As of July 2026, the order book stands at 14.4% of the existing fleet.

Although higher than the 7% order book level recorded in 2021, it remains among the lowest levels in history. For context, the order book accounted for 66% of the fleet in 2008 and around 24% in 2014. Turning to slide 11, we examine the supply fundamentals in a little more detailed fashion. The total dry bulk fleet on the top of the slide currently consists of around 1.1 billion deadweight tons and has grown 3.3% year-on-year. Looking at the age profile of the fleet, roughly 11.8% of the total fleet is over 20 years old, representing vessels that could be considered for scrapping if market conditions moderate or environmental regulations become more stringent. According to Clarksons latest estimates, scheduled newbuilding deliveries as a percent of the existing fleet are projected at 4.5% for both 2026 and 2027 and 6.9% for 2028 and beyond.