Thank you for standing by, ladies and gentlemen, and welcome to the EuroDry Conference Call on the Third Quarter 2018 Financial Results. We have with us today, Mr. Pittas, Chairman and Chief Executive Officer; and Mr. Aslidis, Chief Financial Officer of the company. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session [Operator Instructions] I must advise you that this conference is being recorded today, Friday 16, November, 2018. And I would now like to pass the floor over to Mr. Pittas. Thank you, sir. 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 three and nine-month period ended September 30, 2018. Earlier this year, Euroseas contributed to EuroDry, its drybulk fleet of six vessels, one Ultramax and two Kamsarmax vessels built between 2016 and 2018, and three Japanese-built Panamax vessels built between 2000 and 2004. EuroDry was spun off from Euroseas on May 30, 2018. The results in this presentation refer to the drybulk fleet for the periods presented. Please turn to slide three. Our income statement highlights are shown here. For the third quarter of 2018, we reported total net revenues of $6.8 million, adjusted EBITDA of $4.4 million, and net income attributable to common shareholders of $1.7 million. Basic and diluted earnings per share attributable to common shareholders for the third quarter of 2018 was $0.62 per share. Our CFO, Tasos Aslidis will go over our financial highlights in more detail later on in this presentation. Please turn to slide four for our chartering and sale & purchase highlights. The Eirini P was fixed for a trip of about 25 days at $11,500 per day, and thereafter, fixed for 9.5 to 13.5 months at 103% of the BPI 4TC index. Subsequently, we sold an FFA covering Q1 2019 at $12,200 per day essentially fixing the expected earnings of the Eirini at $12,200 per day for Q1. The Pantelis was fixed for about 55 to 65 days at $115000 per day. The Tasos was fixed about 50 days at $155000 per day plus ballast bonus of $550,000 which equates to an average time charter equivalent of about $13,000 per day. The…

Thank you very much, Aristides. Good afternoon from me, ladies and gentlemen. I would take you over now over the financial highlights for the third quarter of 2018 in the nine-month period of the same year. Let's turn to slide 11. And let's look first at the third quarter numbers. For the third quarter of this year, we reported total net revenues of $6.8 million, representing a 27.2% increase of total net revenues of $5.3 million during the third quarter of 2017, which was the result of the increased number of vessels and the increased average time charter rates our vessels earned in the market. We reported net income for the period of $1.7 million and net income attributable to common shareholders of $1.4 million as compared to net income and net income attributable to common shareholders of $0.7 million for the same period of 2017. The difference between net income and net income attributable to common shareholders accounts for the dividend with paid to Series D preferred shares partly in the second and third quarters of this year. This preferred dividend can be paid out either in cash or in kind and par option. And we elected to pay in kind for this quarter. Adjusted EBITDA for the third quarter of 2018 was $3.8 million compared to $2.3 million achieved during the third quarter of last year. Excluding the effect from the earnings attributable to common shareholders for the quarter of the gain or loss in derivatives, the adjusted earnings attributable to common shareholders for the third quarter of 2018 would have been $0.62 per share basic and diluted, compared to adjusted earnings of $0.29 basic and diluted for the same quarter of 2017. Let's now look to the right-hand side of the slide and review the figures for…

Thank you, Tasos. I'd like to open up the floor for any questions you may have now.

Thank you, sir. [Operator Instructions] Thank you. We will now take our first question. Please go ahead, your line is now open.

This is James Jang, from Maxim.

Hi, James.

Hi, James.

Hi, again. So, the Starlight, that was a nice purchase, is there anything special about the vessel, because we currently have about an $11.1 million valuation on that, is it because it was Japanese-built tonnage or how were you able to get it at a lower valuation?

It's a very good Japanese ship, built out of a very good shipyard. But it is due for its next drydock in about four months. So I assume that that is the reason why we were able to get this in this very, very good price.

Okay, that makes sense. And looking at the sector, rates especially on the Panamax or the Kamsarmax and the Ultramax seem pretty steady. Would you guys look to do more spot fixtures once these charters roll off?

Well, most of the ships, they are on trade charters. So they are essentially spot fixed. It's only those two ships that are on long-term charters. And the one that is on the pool, it essentially gets the market as well, hopefully slightly a little bit better than the market. So, yes, we would say that about 70% of our exposure -- 65% of our exposure is in the spot market.

Okay. And so my question now leads to Tasos. So, you bought [ph] the Starlight, would the Tasos be up for sale or do you feel like you can still operate that, and maybe the Pantelis also there, I'm they're like 18 years, next year they'll be 19. How comfortable are you operating this older tonnage?

They are very well maintained ships. And there is this discussion always in the public markets than an 18-year-old ship is old. Well, it's really not very old, 18 years. When the average scrapping price is 25, we still have another seven good years to operate the ship if it gets scrapped at the average scrapping price. So for us, it has a lot of years. It's a low investment, but it makes considerable EBITDA and earnings. So we will only scrap or sell in -- well, we would sell in an extremely high market, of course, if we see that for further trading. And we would sell for scrap if the market falls significantly. But other than that, it's providing a very decent EBITDA and return on the capital invested.

Got you.

And both of these vessels, James, contribute almost the same as the other ones, and they have a lot lower debt that they carry. So they provide more to the bottom line than younger vessels at this point.

So better cash flow generation from these two right now, right?

Yes, that's right.

And Tasos, do you like the Tasos because it's named after me.

Whether it's named after me or not, but I take its name after me…

So, going back to the Starlight purchase, is the Panamax sector a focus for you guys in terms of vessel purchases or would you look at going up or down? Like if you had to pick a segment for '19 and '20 for vessel acquisitions, what would you look for?

The two areas that we like are the Panamax-Kamsarmax area, and the Supramax-Ultramax area. And depending on the price differential between the two segments, we really decided which of the two vessels to go after. Today, the difference in price is very small between the Panamax and the Supramax, and therefore we go for the slightly more expensive Panamax, which in a good market will earn more. The Supramax-Ultramax is more defensive for a poorer market. Obviously the case we are going because we think they depend on one cargo practically and one country. And we think that that is a huge risk for us. And the smaller vessels are not very interesting, so, yes.

And then one final one, so there's been news, I mean it seems like Ultramaxes are getting bigger. Long-term, do you see the Ultramaxes kind of cannibalizing the Panamax sector or is that not much of a risk for you guys?

To a small extent this is happening today. You see some previous Panamax cargos being carried by Ultramaxes, to a very small extent. But the Panamaxes, they are also growing in size and becoming Kamsarmaxes and bigger vessels. So there is this tendency for every type of ship to grow a little bit in size.

Okay, good. You know what, I have to ask this question, so with IMO 2020 coming up, are you guys preparing for testing the different blends or you just plan on burning marine gasoil, what the plan for you guys?

We are involved in a project which is checking various blends, various additives that you can put to clean your tanks. So we're actively preparing for this event. But we are not ready and we have not decided to put scrubber on our ships. It's obviously the long-term, it's not a solution. Short-term, we admit that it might produce some good results, but the risks are huge, and we intend to what 95% of the vessel owners are doing.

Okay. So then for 2020, let's say the vessels are either on index or pools, how should we be looking at OpEx? Like how much interest do you think the…

OpEx is not going to change significantly. What will change is the bunker price, which is not part of the OpEx, of course, it's covered usually by the charterers, and it's not part of the OpEx.

Okay, great. That's all I had. Thank you.

Thanks, James.

Thank you. [Operator Instructions] We will now take our next question. Please go ahead, your line is now open.

Hi, Poe Fratt with Noble Capital Markets. Good morning.

Hi, Poe.

Just if you could expand on that last answer that you made towards scrubbers, if you wouldn't mind. Why don't you think it's a long-term solution? Do you think that the next leg would be to go to the closed loop system, so could you just expand on why you don't think it's a long-term solution?

Yes, primarily because I believe that environmentalists will oppose the discharge of sludge into the sea or will generally oppose the use of heavy fuel oil no matter how it is processed; secondly, because an actually small number of ships will continue to use heavy fuel oil. There is a big doubt and question if this kind of fuel will be available at the various ports to be provided. I understand that, at least initially, it will be available in the major ports, but in the smaller ports, I think it will not really be available. And as we own smaller vessels that go to various different ports, I doubt that this fuel will be available for us. So, I believe that at the beginning we will see this used by the bigger vessels in all the categories, Capes, tankers, VLCCs, big container ships that have a more steady trade. And eventually that will be stopped as well. But nobody really knows how the market will be able to cope with this sudden change. One thing for sure is that if fuel becomes more expensive it's very possible that the ships will all go slower to consume less fuel and produce less effluents, so that would be a positive for the market irrespective of if you have a scrubber or not.

Yes. And you could get some scrapping through. Could you just expand on the third quarter TCE equivalent or TCE rate? Was there anything that had an unusual impact on that number? It was a little bit above what we expected. And then on top of that, it looked like there was a voyage expense credit in the quarter.

Yes, there was a -- I mean there was nothing unusual on the rate, we just earn the market. But there was indeed, as you observed, a voyage expense credit which resulted from when the charter receipt we buy the vessels there, the fuel, and we resell it, and we made a profit there.

SO, should I -- sorry.

Go ahead.

So if -- should I, just looking at the fourth quarter and expect that net voyage expense to be more -- I mean…

No, I don't think you should carry forward that adjustment.

Yes, it'll be an expense?

Yes, it will be an expense. What happens, Poe, is the following. When you fix a ship to a charterer he buys the fuel that you have onboard the ship at the prevailing price. And then when he delivers the ship to you, you buy it back from him at the pre-agreed price. That was a very low price for a couple of ships that were on longer time charters. We had sold the vessel at a low price and we bought it back at a low price. So with the next fixers, we sold that fuel at a higher price to the new charterer. And we gained that differential. This works positively in a rising fuel price environment, and in a falling fuel price environment you can have voyage increase disproportionally because of the effect of the purchase of the fuel.

Great. And then if I could just ask on the third quarter. The indexed rates, can you just highly the Alexandros and the Eirini, where those index rates actually came in for the third quarter? And then how it's looking for the fourth quarter, just to put that into sort of -- feed that into our model.

I will be happy to provide that information offline. I don't have that information handy, Poe.

Okay.

But the index rate, Poe, it comes from the Baltic Panamax Index. So the ship is earning 103% of the Baltic Panamax Index. So you have that continuously on your screen every day. And on the Guardian Pool, they benchmark themselves against the Ultramax Index -- the Supramax Index. Our vessel earns, I think, 112% of that index. And then, of course, they try to beat that. Sometimes they do, sometimes they don't. More often they do than they don't. So that's the reason we have the vessel in the pool.

Yes, absolutely. And then, Tasos, is that 80% or 79% of the fourth quarter that's fixed, does that include the latest Tasos fixture or is that -- not incorporated in the chart?

Includes whatever is shown on slide six. So it includes the charters that is shown there that are about to expire now, I guess, and includes also the Starlight.

But I thought there was an additional 50 days for the Tasos that was looking into you know, the fourth quarter…

So when we do that recalculation there will be more coverage for the remaining days of the fourth quarter.

Okay, so it's not included. Great. And then when you look at the Starlight, can you just give me a timing on when the drydock is going to happen and how much it's going to cost and what the downtime is for those? And then would you also highlight any other downtime on your fleet. I don't expect any, but if you could just highlight whether there's going to be additional downtime on the fleet in 2019, that'd be helpful.

Starlight, I think was discussed during the call that we expect to have a drydock some time in the first-half of next year.

Yes.

I don't have -- again the exact date. In terms of other drydocks, I believe we don't have other drydocks before the third quarter of 2019. I can double-check that and confirm to you, but that's my recollection.

That's the case, yes.

Any ballpark on the cost of that drydock to the Starlight?

A general ballpark -- I think the way we do a general budgeting for drydocks is we are budgeting around three-quarters of a million plus the cost of water ballast, which another three to four hundred depending on whether we're going to put or not, of course. But that's basically the very broad, the very preliminary numbers we use. And of course, as we approach the dry dock we become a lot more specific internally.

Great, and congratulation on acquiring the Starlight. Can you just talk about any potential -- what you're seeing in the M&A market right now, is it more active, less active, sort of just a tone looking at 2019 on acquisition activity?

We are continuously looking into the market about possibly acquiring another ship on our own. And we are interested in M&A activities that appears. We want to grow the company larger, but we don't have something that we are working on at this point.

Great. And then in contrast Euroseas, you're a little better off I think at EuroDry. Is there any thought on the preferred, and just trying to restructure or pay that down? I mean, that is going to be one cash pay and also higher rate in early 2019 too. And just if you could comment on that that'd be helpful.

In EuroDry, the preferred is a much smaller percentage of senior capital. I mean if you count senior debt and preferred, that is about $80 million. So the preferred is less than 25% of that. And the weighted cost of this capital is less than 8% based on our calculations. Even after the preferred goes to 12%. So in totality, it's not dramatically expensive. I think you hear margins on loans from three for junkyard ships to 5% for medium-age vessels. And if you add LIBOR you are already there. So we are looking for alternatives. I think the current situation is a bit more competitive in EuroDry compared to Euroseas, as you mentioned. But we're looking to see if we find something that goes below, obviously 12% gross, and at equally flexible term to substitute it.

Great. Thanks for that color.

Thank you, Poe.

You're welcome.

Thank you, sir. There are no further questions at this time. Please continue.

Thank you everybody for staying with us and disclose today. Have a wonderful weekend, and we will talk to you in February. Bye.

Thank you everybody from me as well.

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you all for participating. You may now disconnect.