Q3 2019 Earnings Call

Thank you for joining us for Navios Maritime partners third quarter 20, <unk> earnings Conference call. We took place in the company, our chairman and CEO Angeliki Frangou Chief Financial Officer started to see.

Let's call it.

Well be in this morning's call with formal remarks, you management team and after we'll open the call to take questions now I turn the call over to Navios partners, Chairman and CEO and.

February Montenegran Navios partners and a DC in eight of $18778 per day for the third quarter and declared a quarterly distribution of 30 cents per unit, representing a gallon gain of approximately 6%.

With only one vessels being retrofits for scrubber, our vessels are in the water generating revenue.

As you transition on slide five and amend owned 77 vessels. In addition.

Mmm onset is 3.5% of NMC.

We also have an investment in each of the two navios Europe entities that together almost 24 vessels.

Slide six set for the issues, we believe that Navios partners is a clear near dry bulk shipping platform. We have over 500 million remaining contracted revenue for 2019, Navios partners should generate about 60 million of cash flow based on the current rate.

Where we work to unit holders with $1.20 cents per unit in distribution annually, representing a 6% with them and have a dooney repurchase program under which we have used $4.5 million, representing the purchases of approximately 3% of our units.

Outstanding.

Slide seven detailed Asian development, and a man has a strong balance sheet and competitive positioning netted covering drybulk and container market.

Our Q3 EBITDA increased by 85% over Q2.

We used our cash flow to refinance our term loan b and de Levered our biopsy.

The new debt bracket is expected to save us about 11.5 million in internet annually.

We succeeded in reducing our debt by 82.6 million or 20%.

Since year end to end the 18.

As a half of this effort will have a modest net debt to book capitalization at the end of Q3 of 35.2% and a favorable debt profile within our debt maturing until 2021.

On the cost side, we extended the management agreement for five years.

Operator, eight will be fixed through December 2021 update of about 3% higher than that guy and rate.

Our business leveraging airforce and cost discipline has positioned us generate operating cash flow fourtwenty 19th of about 60 million a current rate and about $72 million if rate recovery twotwenty year averages.

Looking forward, we have anat creative growth pipeline, requiring minimal additional capital investment for dissolving Navios Europe , one and entering into bareboat charters for two comps are Max vessels.

Slide eight highlights our proactive approach to refinancing the term loan B, which we completed on October 10, 2019th.

The 418.5 million terminal on the balance as of the year end 2018, worsening financed with 300 and.

$1.3 million in commercial bank debt 49.5 million in sale leaseback transactions using 67.7 million class from biasing.

The commercial bank debt has an average interest rate of LIBOR, plus 2.9, and an average amortization profile of 7.9 years.

Sales buffer slip it has an average implied in days of 6.4% and an average amortization profile of 9.4 years.

Through the refinancing effort, we have also extended our debt maturities through to anti therapy, and which we expect to save about 11.5 million in lean the annually.

Slide nine reviews, creating growth pipeline, our first focusing in the dissolution of Navios Europe one.

We are all about 50 million and expect to convert the receivables into ownership for five container vessels plus cash these conversations around corn and we'll update you as they develop.

We're also considering long term bareboat charter ins will purchase option for two kamsarmax vessels that bareboat charter in Kamsarmax vessels cost about 29.1 million eight and provide 80 million financed with no covenants and implied fixed interest rate of 405% there.

They're both chartering kamsarmax vessels cost 29.9 million needs and provide 80% finance was now covenants and an implied fixed interest rate of 4.5%. The charters also have a seven year de escalating purchase option.

Slide 10 highlight a new management agreement, which we will go into effect on January 1st 2020 under the new terms demand, we provide us with commercial and technical monitoring services.

Opex will be fixed for two years through December 22 anyone.

At the rate highlighted in the table they to reflect a 3% increase from the current rate. The agreement also includes the commercial and technical management free of $50 per day per vessel.

Under the new administered the service agreement.

Gating DNA cost will be reimbursed.

No additional retrieve will be charged under the agreement where the for sale purchase transaction or in the national launch or other financing transactions.

Nm Mems average fixed operating costs under the new management agreement is 15% lower compared to the projected mime market of pet, thereby providing us with a 10.4 million of expected annual cost savings.

Slide 11 shows significant cash flow potential for 2019 are contracted revenue is expected not only to cover our expenses, but also to generate free cash flow for an amount.

At 1293 open days flat days on indexed charters should enable an amendment to generate about $60 million in free cash flow at current rates and about 72 million in free cash flow should rates rig 20 year averages.

Slide 12 shows our liquidity as of September Thirtyth 2019, we had a total cash of 26 million and total borrowings of $455.3 million.

Our net debt to book capitalization is a modest 35.2%. Moreover, we have no debt maturities until Q3 of 2020 run and now committed growth Capex.

At this point I would like to turn the call over to Stratos Desypris Navios partners CFO , who will take you through there is out of the third quarter of 2019.

I think a lucky and good morning.

I will briefly review automobiles predecessor results for the headquartered in nine months ended September 32000 might be.

Financial information is looking for Brazil, and summarizing the slide presentation on the company's website.

Please note simplicity the discussion with the financial results below exclude the effect of one off items listed on slide 13.

I was thinking much familiar localism dealing with a refocusing and very financing automobile.

Our portable completed in October we fully repaid the outstanding amount one year before these maturities.

Pro forma for the term loan B, we have reduced by our debt by over 80 million.

Moving to the financial results as low as shown on slide 13.

Our revenue for the third quarter 2018 increased by 8.9, we look for 63 and half million compared to 62.6 million put because of your positive.

Can you will mainly due to the 6.7% increase and the time charter equivalent vacancy in the third quarter 2018, and it was mitigated by the higher than half percent decrease not available days.

Adjusted EBITDA for the third quarter 2019 was 41.3 million.

Compared to the second quarter 2019, adjusted EBITDA increased by 85%, reflecting the significantly grow market.

Adjusted net income from the quarter amounted to 18.3 million.

Operating surplus for the third quarter 2018 amounted to 25.7 million.

Replacement and maintenance Capex reserves were 7.2 million.

Fleet utilization for the third quarter 218 was almost 99%.

Moving to the nine month operations Sensata revenue from the nine months decreased by 9% 258.1 million compared to 173.8 million in 2018.

The decrease was mainly due to the 8.2% decrease in the time charter equivalent rate achieved in the main model 2018, as well as a 2.6% decrease not available days.

Adjusted EBITDA for the nine months for 2018 amounted to 86.3 million compared to 108.2 billion polishing period of last year, probably modestly due to the decrease in delivering.

Adjusted net income for the name model 2018 amounted to 14 point Sevenmillion.

Operating surplus for the nine months ended September 32018 was 37.6 million.

Turning to slide 14, I will briefly discuss some key balance of data as of September says a proposal 19.

Cash and cash equivalents was with the 6 million.

Long term debt, including the current portion was 455.3 million.

The book capitalization was 35.2% of the end of the quarter.

As discussed earlier pro forma for the repayment of the term loan B, which were completed in October we have reduced debt by 82.6 million.

Moving to slide 15.

We declared because distribution for the third quarter 2018, or 50 cents per unit equivalent to $1.20 cents per unit on an annual basis.

Our current annual distribution provides for an effective yield of approximately 6% based on yesterdays closing price.

Vertical dated November seven 2018, and the payment dated November 14 2019.

Total cash distributions for the quarter amount of 3.4 million.

Our common unit coverage for the quarter 7.8 times.

Slide 16 shows the detailed roughly having lots more than diverse fleet with appropriate total capacity of 4.3 million deadweight tons and another days of tenant have yes.

Our fleet consists of 27 vessels 14, Capesizes 15, panamaxes through to Handymax and five containerships.

In Slide 17, you can see the list or with the contracted rates and respective expiration dates per vessel.

Our charters have another is remaining contract duration of approximately two years.

Currently we have contracts and type of 6.6% of available days for 2018, including days contracted at index linked charters.

The exploration stage expiration dates expand to 2028.

In slide 18, you can see the details of Navios containers. They said it was listening but in December 2018. Currently controls 29, Containerships established progress as I said within help us and all the Supreme Theres been matters containers.

I'll now pass the call to George Achniotis Executive Vice President of business development to discussing the section George.

Thank you straddles please turn to slide planting.

The IMF forecasts world GDP growth of 3% for 2019, and 3.4 percentage management.

The emerging and developing Asian markets, which drive dry bulk demand are expected to grow at a healthy 5.9% in 19 and 6% Internet traffic.

The drybulk market experienced a holiday 2019, we then it's going to near historical lows in Q1, mostly due to disruptions in the supply of iron ore in both Brazil and Australia.

Volatility continued in the third quarter as the BTI reached at nine year high of 2518 nearly September due to strong demand across all bulk commodities along with a reduction in fleet capacity due to scrabble retrofitting.

Turning to slide 21.

For the second half 2019, dry bulk demand for the three major cargoes of iron ore coal and grain is forecast to outpace the first half by almost 7% or about 110 million times.

These increases led by iron ore.

Which is expected to grow by 11% or 777 million tax.

Much of which will come from Brazil in Canada, adding to ton miles.

At the same time the supply of vessels is expected to reduce as vessels are retrofitted with scrubbers about 4.3% of the Capesize fleet is expected to be out of service in Q4, and the first quarter of 2020.

Given current supply and demand forecasts the fundamental fundamentals going forward to remain positive.

Slide 22, Chinese steel production growth is an impressive 8% through September .

Chinese steel exports continue to be strong due to large infrastructure projects outside China. The abandon road initiative remains the cornerstone of Chinese economic plans for the next few years supporting steel and power demand domestically and abroad.

The Chinese government continues to stimulate the economy with large infrastructure project projects, resulting in a 12% increase.

Internationally consumption through September 2019.

The Chinese steel means have reduced their iron ore stockpiles by about 47 million times between June 18, and July 19.

With additional availability of iron ore in the second half 2019 shipments to China have increased year on year importer August and September and stockpiles have increased by about 90 million that.

The replenishment of the stockpile since it's expected to continue into 2020 driving demand for Capesize vessels.

Please turn to slide 23.

Demand for coal in Asia remains strong Chinese seaborne coal imports increased by 9% through September 2019.

India is expected to surpass China is the largest importer of coal in Asia in 2019 coal imports in India are up 18% through July .

Indian domestic coal strives to overcome logistics issues and thus coal imports are expected to remain strong.

Turning to slide 24 worldwide grain trade has been growing at five by 5.2% CAGR since 2008, mainly driven by Asian demand.

The trade war between the USA in China affected the floor grains, Ituran 18, as the Chinese tend to South America for additional imports and reducing person from the USA.

Forecast for large grain harvest in South America, Russia, and Ukraine will promote the export sales going forward the south American crops. This year have been plentiful and South American farmers continue to explore the large quantities taking advantage of the U.S. China trade this options.

Moving to slide 25, net fleet growth is forecast to be about really have presented to us maintain.

The current order book before non deliveries about 10.6% of the fleet, which is one of the lowest Ohio.

Newbuilding contracting the contracting is down about 50% from 2018 levels. Accordingly, net fleet growth is expected to remain low going forward.

Turning to slide 26.

With us over 20 years of age at about 72% of the total fleet, which compares favorably with a previously mentioned low.

Record low order book.

Through mid October grabbing was 6.1 deadweight tons.

And is already surpassed the total scrapping for 2018.

Got it cause of comply with higher more regulations for ballast water treatment systems and surely regulations are expected to result in high scrapping going forward.

In conclusion positive supply demand fundamentals, along with reduced fuel efficiency caused by a more transatlantic.

Should provide significant support to the dry bulk market through 2019 and into 20 trending.

This concludes my presentation I would now like to turn the call Arbitron Gallagher for final comments oncology.