Euroseas Ltd. · NASDAQ:ESEA
Euroseas — Investor Presentation (November 2008)
34 slides from Euroseas's investor presentation, Nov 25, 2008
Slide 1: Investor & Analyst Luncheon Presentation
(ESEA) Investor & Analyst Luncheon Presentation November 25, 2008
Slide 2: Forward-Looking Statements
Forward-Looking Statements Statements in this presentation may be "forward-looking statements" within the meaning of federal securities laws. The matters discussed herein that are forward-looking statements are based on current management expectations that involve risks and uncertainties that may re
Slide 3: Agenda
Agenda 1. The Dry Bulk & Containership Market 2. Euroseas Current Position 3. Euroseas Strategy 3
Slide 4: A Dramatic Change in Market Conditions
A Dramatic Change in Market Conditions ! Credit and financial crisis overwhelmed world markets ! Economic slowdown spread fast ! China did not return to markets after Olympics … Para-Olympics… holidays.. ! In addition, continuing row with iron exporters about prices ! Trade came, practically, to a h
Slide 5: Dry Bulk Rates: 2008 Vs. Previous Years Comparison
Dry Bulk Rates: 2008 Vs. Previous Years Comparison Baltic Dry Index (BDI) Source: Capital Link 5
Slide 6: Dry Bulk Charter Rates 1990-2008
Dry Bulk Charter Rates 1990-2008 Spot Earnings 80000 70000 Panamax '97/98 blt 60000 Panamax '80s blt Handy 30,000 dwt 50000 $ / day 40000 30000 20000 10000 0 1996-0 1 2000- 01 2004 -01 200 8-01 1990-01 1991-01 1992-01 1993-01 1994-01 1995-01 1997-01 1998-01 1999-01 2001-01 2002-01 2003-01 2005-01 20
Slide 7: Containership Charter Rates 1993-2008
Containership Charter Rates 1993-2008 6-12 Month Time Charter Rate 40,000 35,000 2000 teu 30,000 1700 teu 1000 teu 25,000 $ / day 20,000 15,000 10,000 5,000 0 1993-01 1995-01 1996-01 1998-01 1999-01 2002-01 2003-01 2005-01 2006-01 2008-01 1994-01 1997-01 2000-01 2001-01 2004-01 2007-01 Source: Clark
Slide 8: Dry Bulk & Containerized Trade Growth % p.a.
Dry Bulk & Containerized Trade Growth 16% 14% Dry Bulk Container 12% 10% Average = 9.8% % p.a. (tons, teus) 8% 6% 4% Average = 3.7% 2% 0% -2% 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Source: Clarksons 8
Slide 9: Economic Growth Drives Seaborne Trade
Economic Growth Drives Seaborne Trade Trade Vs. World GDP Growth, 1987-2007 16% 14% Containerized Trade Drybulk Trade 12% 10% Trade Growth, % p.a. 8% 6% 4% 2% 0% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% -2% Wolrd GDP Growth, % p.a. 9
Slide 10: World GDP & Shipping Demand Growth
World GDP & Shipping Demand Growth Real GDP (% p.a.) 2006 2007 2008E 2009 2010 2011-13 USA 3.3 2.5 1.6 0.6 2.0 2.5 Eurozone 3.0 2.7 1.2 0.6 1.3 2.1 Japan 2.8 1.9 0.7 0.6 1.3 2.5 China 10.5 11.2 9.8 8.5 8.7 8.4 India 9.5 9.0 7.3 6.8 7.5 7.8 Russia 7.4 8.1 7.5 6.8 6.0 6.0 Brazil 3.8 5.4 4.6 3.5 4.4 4.
Slide 11: Drybulk Age Profile & Orderbook Delivery Schedule
Drybulk Age Profile & Orderbook Delivery Schedule Panamax Dry Bulk Age Dry Bulker Profile(1) Dry Bulk Orderbook (1) m dwt m dwt 130.0 29.7% 120 22.0% 120.0 110 110.0 100 100.0 48.3 90 90.0 80 12.3% 61.30 80.0 17.4% 17.7% 15.6% 70 70.0 20.6 14.4% 60 60.0 35.7 31.0 12.8% 30.53 39.67 15.8 50 50.0 8.0 4
Slide 12: Containership Age Profile & Orderbook Delivery Schedule
Containership Age Profile & Orderbook Delivery Schedule Containership Age Profile(1) Container Orderbook (1) m TEU m TEU 14.6% 6.0 2.0 16.0% 12.1% 46.6% 10.5% 5.6 5.2 4.8 1.64 1.6 13.8% 4.4 0.44 0.64 4.0 0.93 3.6 1.2 1.04 0.4 0.35 3.2 1.23 0.33 2.8 21.2% 2.4 0.02 0.8 0.2 1.49 17.0% 0.44 2.0 1.12 0.2
Slide 13: Questions About The Orderbook
Questions About The Orderbook Orderbook likely overstates what will be Will they be delivered delivered? 1) Many vessels, especially dry bulkers, ordered in new established yards, or, yards that have not been built themselves yet (greenfield yards) Can they be 2) Technical factors coupled with diffi
Slide 14: Dry Bulk Orderbook: How Much Might Be Cancelled?
Dry Bulk Orderbook: How Much Might Be Cancelled? Drybulk Contracting 22.5 20.0 Contracting delivered by now (approximately) 17.5 Contracting not yet delivered (approximately) contracting, million dwt 15.0 12.5 10.0 7.5 5.0 2.5 0.0 2001-01 2001-04 2001-07 2001-10 2002-04 2002-07 2002-10 2003-04 2003-
Slide 15: A Possible Supply/Demand Balance Scenario
A Possible Supply/Demand Balance Scenario Dry Bulk Container Orderbook - 72% (Nov-08) Orderbook - 47% (Nov-08) 2009 2010 2011 2009 2010 2011 Trade Demand Growth(1) 4.5% 5.5% 6.5% 6.5% 10.0% 11.5% Delivery Schedule(2) 15.6% 22.0% 12.3% 14.6% 12.0% 10.5% Assumed Cancellations(3) -1.6% -6.6% -3.7% -1.0
Slide 16: FFA Market Track Record – Panamax 1-yr TC Rate
FFA Market Track Record – Panamax 1-yr TC Rate 100,000 90,000 80,000 70,000 60,000 usd / day 50,000 40,000 30,000 20,000 10,000 0 05Q1 06Q1 07Q1 08Q1 09Q1 10Q1 FFA - Dec '06 FFA - Nov 12, '07 FFA - Jan 25, '08 FFA - Jul 28 '08 FFA-Nov 20 '08 Actual 16
Slide 17: Agenda
Agenda 1. The Dry Bulk & Containership Market 2. Euroseas Current Position 3. Euroseas Strategy 17
Slide 18: Current Fleet – 16 Vessels
Current Fleet – 16 Vessels Size Year Acquisition Book Value Remaining Name Type DWT TEU Built Price ($MM) ($MM) Life (yrs) Irini Panamax 69,734 - 1988 $8.2 $5.2 5 Aristides N.P. Panamax 69,268 - 1993 23.5 20.2 10 (1 ) Ioanna P. Panamax 64,873 - 1984 28.6 29.2 4 Gregos Handysize 38,691 - 1984 13.1 10
Slide 19: Vessels Employment Chart
Vessels Employment Chart 37% coverage in 2009 GREGOS Spot IRINI Spot / party fixed IOANNA P. $35,500 Spot NIKOLAOS P. Spot $36,000 Spot Dry Bulk Carriers ARISTIDES N.P. dd $52,000 ARTEMIS $19,000 Container Ship Vessels KUO HSIUNG $15,800 Multi-purpose Vessel DESPINA P Spot $15,250 JONATHAN P Spot $1
Slide 20: Historical Cash Flow Breakeven
Historical Cash Flow Breakeven Fleet Statistics Nine Months 2006 2007 2008 (unaudited) (unaudited) (unaudited) Number of vessels 8.06 11.48 15.48 Utilization Rate % 98.9% 99.7% 98.7% Averages in usd/day/vessel Time Charter Equivalent (TCE) $ 14,313 $ 21,468 $ 25,868 Operating Expenses Vessel Operati
Slide 21: Rapid Debt Repayment
Rapid Debt Repayment Debt Debt Repayment Repayment Schedule Schedule –– As of 9/302008 As of 9/302008 Cash Cash Flow Flow Breakeven Breakeven $30 ! $13 m less debt repayments in 2009 $13m lower debt $25.6 payments in 2009 ! $2,250 / day / vessel lower cash flow $25 breakeven $20 ! 2009 Cash Flow Bre
Slide 22: Balance Sheet / Loan Covenants
Balance Sheet / Loan Covenants ! Balance Sheet highlights (as of September 30, 2008): ! $74+ million in unrestricted cash ! $7+ of restricted cash ! Book value of vessels abt $268 million ! Debt: abt $62 million ! Net Debt: abt -$19 million ! Retained Earnings: $57+ million ! Shareholders’ Equity: a
Slide 23: Agenda
Agenda 1. The Dry Bulk & Containership Market 2. Euroseas Current Position 3. Euroseas Strategy 23
Slide 24: Euroseas Strategy: Remains the Same
Euroseas Strategy: Remains the Same • Selectively acquire vessels • Time to renew / expand bulk carrier fleet • Difference of new to old vessel down to 20m from 70m • Continue focus on cost control • One of the lowest cost structure amongst public companies • Q3 OPEX about 6% lower than Q2 (8% lower
Slide 25: Acquisitions 2005-2008
Acquisitions 2005-2008 We avoided investing at the peak of the market except for Ioanna P 70 Ioanna P 60 Dry Bulk (Panamax) Containership (1700 teu) 50 million $, 15-yr old vessels 40 Gregos 30 Aristides NP Clan Gladiator Maersk Noumea 20 Artemis Manolis P Tiger Bridge Tasman Xingang Despina/Jonatha
Slide 26: Residual Value of Acquisitions
Residual Value of Acquisitions Acquisitions since going public: (all figures in million USD - approximate calculation) Cash Value Historical Remaining Purchase income "down" Avg Price Charter Vessel Type date Price to 9/30 to (real '90-'07) Premium Difference Artemis Container Nov-05 20.8 13.3 7.6 1
Slide 27: Investment Evaluation: Disciplined Investing
Investment Evaluation: Disciplined Investing ! Strict Evaluation Framework ! Known or FFA based charter then historical average (>10 yrs) rates ! Minimum unlevered IRR requirement ! Leverage tailored to project cash flows ! Risk Assessment & Control ! Market ! Credit / charterer ! Residual value ! O
Slide 28: Relative Valuation Newer Vs. Older Vessels
Relative Valuation Newer Vs. Older Vessels Panamax Secondhand Prices 100 90 80 5-yr old 73,000 dwt 70 10-yr old 72,000 dwt 15-yr old 69,000 dwt abt $40m 60 20-yr old 60,000 dwt million USD 50 40 30 20 abt $20m 10 0 2001-01 2001-07 2002-01 2002-07 2003-01 2003-07 2004-01 2004-07 2005-01 2005-07 2006-
Slide 29: Cost of Operations
Cost of Operations Daily costs per vessel 8,000 2008Q3 trends ! Overall costs achieved are amongst the lowest of the 7,000 public shipping companies 6,000 ! Low costs while maintaining 5,000 safe operations is an $ / day 4,000 important competitive 3,000 advantage in the bottom of 2,000 the market c
Slide 30: Employment Strategy
Employment Strategy ! Increase coverage for 2009 ! As of Sep. 30, 2008 we had enough contracted revenue to cover 100% of our cach expenses for next 12 months – Operating expenses, G&A, interest, drydocking expenses – Expense coverage is currently about 70% as of Dec. 31, 2008 for 2009 ! Use FFAs – H
Slide 31: Leverage & Dividend Policy
Leverage & Dividend Policy $0.4 20% 18% • Objective to provide substantial dividends through market cycles 16% $0.3 14% q u arterly d ivid en d • Recently reduced dividend to account for ann u alized yield 12% changing market conditions and maximize $0.2 10% purchasing power and flexibility • Yield
Slide 32: Agenda
Agenda 1. The Dry Bulk & Containership Market 2. Euroseas Current Position 3. Euroseas Strategy 4. Conclusions 32
Slide 33: Comparative Stock Performance: Jan. 1 – Nov. 21, '08
Comparative Stock Performance: Jan. 1 – Nov. 21, ‘08 100% 80% 60% 40% 20% 0% -20% -40% -60% ESEA DSX -80% FREE SSW EGLE EXM GNK PRGN DAC TBSI DRYS -100% ESEA DSX DRYS EGLE EXM GNK FREE PRGN TBSI DAC SSW 33
Slide 34: Euroseas Will Sail Through Challenges
Euroseas Will Sail Through Challenges ! Opportunity to renew and expand ! Strong Balance Sheet – Lots of cash and low leverage ! Purchasing power – Abt $70 m own cash – Abt $50 m in debt from own fleet / 6 vessels are debt free – Debt for new acquisitions ! One of the most cost efficient operators !