Q3 2019 Earnings Call

Now I turn the call over to Navios acquisitions, Chairman and CEO Angeliki Frangou Angeliki centering on and good morning, daughter, who joined US from today's call I'm pleased with our results for the third quarter of 2019, Navios acquisition recorded revenue of $59 million, an adaptive downstream to 3.9 million.

Yes.

These increases of about 42% and hundred 42%, respectively over Q3 of 2018.

We declared a quarterly distribution of 30 cents per se for Q3, reflecting a gallon yield of about 16% in a robust tank area market, where any join the best of towards we have significant cash flow visibility from 430 million in long term.

Contracted revenue about 43% of our 2020 available data fixed.

Almost half of those days also have profit sharing.

At the same time, we can capture upside as 61.7% of our 2020 available days are open or on a floating rate.

Also oil tankers are underwater generating revenue as you have not tank is being freed with scrubbers slide four present, some company highlight and an eight has a core fleet of 41 diverse I guess with an average age of 8.9 years. We also have my time investment in entities.

Its own 24 vessels with the as of the end of Q3 or about 83.9 million.

Slide five highlighting key developments and then May reported strong financial results for the third quarter with 23.9 million adjusted EBITDA for the first nine months of 2019 on adjusted EBITDA was 87 point $4.3 million.

As I mentioned, a moment ago for 2020 will have a good mix of fixed revenue exposure to the market. We have a unique growth pipeline that requires minimal capital. We are looking to dissolve Navios Europe . One in Q4 of 2019 as of September Thirtyth 2000.

In team and they had 32.3 million of receivables due from Navios Europe one.

We refinanced our term loan b by securing hundred 84.8 million of new financing with maturities extended through 2020 setting.

The leveraging remains a priority we have reduced outstanding debt by $45.3 million are for potential five this year.

We also raised 50 million in equity in October of 2019 on the cost side, we extended our management agreement for five years Opex rate will be fixed.

December 2020 , along with an increase of about 3% compare to client.

Slide six highlight recent updates that we we have led to a robot target market.

Grab.

Freaking duration of action on Costco their lab, Vlccs and an increase in Jordan start due to compliance with the upcoming IMO 2020 regulations have considerably reduced reliance is available globally.

Physical attach on the Saudi Arabia oil processing facility, adding drastic down I guess sanctions on Iran, and deteriorating crude production and actuals for management area in Libya has also impacted the market.

Finally increased ton mile from us oil exports kovarsky to the effective demand side of the equation.

Really see and product tanker spot rates should continue to be strong in the near 10.

Compared the beginning of a year the real 51 year time charter rate has increased by 91% to $46750 per vessel per day, while them up to one year time charter rates have increased by 19% to 16000 on one hand.

And and $25 per vessel per day.

Slide seven illustrate our promising free cash flow potential for 22 and their contracted revenue is expected to be hundreds.

Point $1 million. However, an M&A also has 8006 cover a 42 days that open or on floating rate, giving us a breakeven rate of $18489 per day.

Assuming that Guy one year time charter eight 2020 expected revenue for the from base open on the floating rate should be $216.4 million, assuming the guys portrayed 2020 expected revenue from base opened on floating rate would be 200.

The $2 million.

With cost visibility, we believe we should generate free cash flow of 66.6 million dollar or a 122.3 million at current one year.

Charter rate.

And guidance for the rates respectively.

Slide eight goes through our accretive growth pipeline.

We are in discussions about dissolving Navios Europe , one by the end of Q4 of 2019. We believed that this will result in NNN, taking possession of the five tanker vessels from that fleet slide nine highlight our proactive approach in repaying the term loan B, which we completed in October of two.

Margin 19.

The 196.8 million term loan B balance was repaid with 838 million of Chinese loses 15 million in Japanese, leaving and 31.8 million in bank finance and 12 million using cash from our balance sheet.

In successfully financing the term loan b, we diversify that and extended our debt maturities through 227 and created 3.4 million in.

Interest savings slide 10, highlighting new management agreement effective January 1st 2020 .

Under the new standard manager will provide us with commercial and technical management services, where opex will be fixed for two years through 2020 run at rates that alive Paypal the rate, reflecting 3% increase from client rate under the new administrative service agreement allocated DNA.

<unk> costs will be Brett. The agreement also include a commercial and technical miners, we see a $50 per day prevent no additional fees will be just under the agreement.

Therefore sale of purchase transaction or knowledge or Floyd you nation of launch and now that financing transactions.

Slide 11.

Shows our liquidity position pro forma for the Theyll be repayments equity raise senior note purchase and sale of NAV, a little ACA is adapting to $76.3 million as of September 32019.

Our pro forma net debt to book capitalization is 73.6%.

We have fully funded of growth capex.

The format for the payment of the term loan B, we do not have any significant debt maturities and be Q4 2020 one.

Slide 12 days at 22, and the cost structure, 42.7% of our 2020 available days are fixed at an average base rates of almost $21000 per day.

Our total cost which includes operating expenses.

General and administrative the X.

Inc.

Retrofits, we'll continue to reduce effective VLCC supply in the near future.

Please turn to slide 20.

The August record of 12.4 million barrels per day solidifies us as the world's largest crude oil producer us crude exports have continually expanded since 2015, reaching a record 3.4 million barrels per day in October of this year with from almost zero in 2012. Additionally, about 1.4 million barrels of.

As light crude oil pipeline capacity is expected to open before year end. This should increase us Gulf exports, which is positive for ton miles.

In terms of ton miles and moving accrued for Atlantic Basin to China uses about as many vlccs as a movement from the Arabian Gulf, even though the Arabian Gulf shipped about two more times oil to China.

Increases in Atlantic Basin crude go into the far East will continue to create more demand for vlccs at us export capacity increases us Gulf, China trade issues get resolved and Atlantic basin countries begin and expand exports over the next couple of years.

Please turn to slide 21.

Tanker fleet utilization is expected to reduce over the seasonally strong winter months due to scrubber retrofitting and associated yard delays.

Assuming 75% of the contracted retrofits occur 2.6% of accrued fleet tank tanker fleet and 1% as a product tanker fleet will be out of service. During this period overall, 3.2% of the VLCC fleet is expected to be out of service to the retrofits. This should tighten vessel availability and support time charter rates.

Please turn to slide 22, net fleet growth to last week equaled, 7.5% with 18.6 million deadweight leverage against 1.8 million deadly removals. We note that while the order book show 67, Vlccs as of last week. There are a 120 vlccs over 17 years of age with the upcoming IMO 2020 and valley.

This water management regulations that will lead some vessels to retirement, we believe that the order book and fleet are well balanced.

Turning to slide 24, according to the Iot refinery capacity is expected to increased by 13.7 million barrels per day from 2019 to 2024, including all additions expansions and upgrades.

About 74% of that capacity will be added in Asia, and the middle East with the EA project in China, and other not OE CD Asia to increase refinery capacity.

By 5.2 million barrels per day in 2.4 million barrels per day, respectively. Please turn to slide 25 euros crude production has risen about 130% since the end to 2008, reaching 12.4 million barrels per day in August of this year the highest level production since records started 1920.

Dsos increased the total product exports by about 500%.

To about 5.8 million barrels per day since 2004, please turn to slide 26.

Good refinery maintenance peaked in may at 7.1 million barrels per day, partly due to preparations for increasing product demand associated with IMO 2020.

For the balance of the year refinery capacity could rise up to 5 million barrels per day due to a combination of refinery additions and a significant reduction in refinery maintenance as refineries get ready for this historic fuel switch as result of iron ore 2020.

Please turn to slide 27.

Through September of 2019, the fleet grew 3.8% on deliveries of 6.7 million deadweight less 600000 deadweight of demolition.

At our 5.7% of the product tanker fleet is 20 years of age or older as of October one 2019, near 191 product tankers on order and 358, which are 17 years of age or older. Total order book is much less to know ships that are 17 years in Asia older, particularly given historic non delivery rate.

It's becoming ballast.

Water and IMO 2020 rules and scrap prices that remain high.

As a result projected net fleet growth for 2019 is only 4.5% projected need fleet growth for 2020 is even lower a 2.4% as owners seek to have ships on the water. This year in advance of the expected IMO 2020 disruptions in product trades.

Thank you. This concludes my review and I would like to now turn the call over to lead us corridors for the Q3 financial results. Thank you that I will discuss the financial results for the third quarter ended September 32019.

Please turn to slide 29 revenue for Q3, 2019 increased by 41.8% position that medium from $41.6 million using 2018, reflecting the increase leads of Navios acquisition, Poland that measure was Navios midstream partners and the improved rate environment compared with the same period last year.

In Q3, 2019, we've had 99.4% fleet utilization, we saved the time charter equivalent of $15349 per day improved from the $12694, but they achieved in the third quarter of 2018.

Time charter and lawyers expenses of 5.4 million, mainly reflects expenses relating to our vessel spot volumes during the quarter.

Operating expenses were 26.8 million MGMT expenses were 3.7 million.

Adjusted for the 7.3 million sediment losses relating to the sale of one gives us in October 2019, and the 0.2 million stock based compensation EBITDA for Q3 2019 increased by more than two times to 23.9 million from 9.9 million includes three 2018.

Other expenses include depreciation amortization of 17.2 million and interest expense and finance cost of 22.8 million.

Net loss of 16.2 million reported for the quarter has been further adjusted to exclude 32.7 million accelerated amortization of intangible assets relating to the termination of to charter contracts in October 2018.

Turning to the financial results for the nine month period at September 32018 revenue increased by 50.7% 294.7 million common hundred 29.2 million last year, reflecting a time charter equivalent of $16888 per day and a 99.7%.

Utilization.

Operating expenses were 81.2 million and DNA expenses were 15.7 million adjusted EBITDA for the nine months of 2019 increased by more than two times to 87.3 million from 35.9 million in 2019.

Depreciation amortization was 52.3 million and net interest expense and finance costs was 69.5 million.

Adjusted net loss for the nine month period was 34.2 million.

Slide 30 provides selected balance sheet data as of September 32019, cash and cash equivalents, including six axis was 102.9 million vessels net book value was 9.3 billion total assets amounted to 1.6 billion total debt as of September 32018, well.

As 1 billion 225.3 million, resulting to a net debt to capitalization ratio of 73.8% into 347.2 million of then was drawn to finance three product tankers that were collateral to the term loan B. This amount was paid in October as part of the full repayment of the term loan b.

Pro forma for that them globally refinancing the sale of now the electron beam sisi the equity offering and the senior notes repurchases gases adapted to 76.3 million and debt outstanding to 1 billion in 158.8 million.

Year to date Navios acquisition has reduced its debt outstanding by 4% or 45.2 million.

Turning to slide 31 as for return of capital to shareholders for the third quarter, we declared a dividend of 30 cents per share equivalent to $1.20 cents on an annualized basis. The deemed then will be paid on January nine 2020 to shareholders on record as of December 17, 2019, we have also repurchases.

<unk> point 7 million common shares to date through our share repurchase program, providing an additional 4.7% return while stockholders and now I would like to pass the call closet leaking for final remarks Angeliki.

Thank you.

Okay.

Questions.

Thank you at this time the floor is now open for questions. If you wish to ask a question simply press Star then the number one on your telephone keypad.

Thanks for your question asked and answered any westerners yourself from the Q press the pound team.

Our first question comes from the line of Chris Wetherbee City.

Hi, This is Lee on for Chris. Thank you for taking my question.

So I just had I just had a few questions about the Navios Europe .

Solution.

I'm just I know you guys have a 32.3 million receivable out there and if the.

The entity dissolved would you receive all of this amount or like would it be yet or is there a timeline or for receiving these proceeds.

The next question.

Think about thinking about a so go ahead.

In that manner.

Finally.

We have a fivex.

Not a wire.

Mark.

Okay.

We'll go down.

Hello.

Yes go ahead and.

So you can actually see.

Hey, Matt.

And number two.

Yes.

Yeah.

Yes so.

Good afternoon.

Situation.

Okay, So you're saying that those like those five vessels are basically worth $80 million she said.

Something around.

Yes.

I mean, you've got to the American there.

Okay.

If you were to kind of roll them into your fleet at that point would you have to make whatever be any cash outlays associated with doing that would you kind of effectively have purchased them or would you like are there no cash outlays.

Turning to shut out for us again.

They involve together with.

And he only you Dave and then if you look what do you currently have you been doing so you get the vaccine.

That does so something that is already in your balance sheet that line.

$2 a navy.

Got it.

So and it also kind of sounds like just to be clear that if you would do if this were to take place.

That all five vessels what would come at the same time or would there be like a timeline for the vessels coming at you like one by one.

Yes, we beyond that.

Yes.

The same way we bought this and.

Okay.

Got it.

And.

How do how do you then think about the Navios like Europe , two and like the receivables that you have outstanding for that is there would be or will there be a similar process for that but you guys would go through ad.

What.

Yes, but I have to remind you of Navios Europe do we have if you aren't linear RBC level.

Yeah.

Hello.

My name is likely to review, our and approximate three.

Ultimately Canadian dollar.

So in that case.

Hey, Scott Davis and.

Visual outcome as rational suddenly become less Scott.

Got it.

All right and also just or other point of clarification on the five tanker vessels for now we serve one with EBITDA.

I understand based on what disclosures on that slide that 15 million is based on one your time charter rates as per Clarksons.

But it does that mean that all those vessels like well be off charter when when you could potentially receive them or do they currently have existing charters.

Yes.

Thank you.

Police that they actually in a reasonable.

Yes.

He and the other data.

Very much.

Markets.

Yes.

Okay got it.

And I guess just final question.

What are you thinking about vessel of Alex I know that vessel values have been stepping up recently.

In particular with some of the Vlccs that you guys own.

That older like second hand values.

Where do you guys kind of see that going do you think that you could look.

Like you can translate that into like the adult could you increase going forward or what do you think are the main puts and takes when it comes to vessel values going forward.

Yes.

We have seen that they did they.

Good.

Hey, Matt.

And then come back and then if you see a.

John Hogan diversity within the modernization moving pieces in there right, but we show and based loans to fall in the foreseeable couple of quarters. They looked really strong. Additionally, navios does not have any good out there. So we do not have all client base.

On the element BT as were evident.

Why is strong.

I think there.

Cash flow generation actually saying.

Matt.

Hi.

And I mean, he's also.

If I was going up we showed that values.

Okay.

Going about.

Slide 7% to 7% Hyatt somewhere they are today.

Manger to do.

Alright, Thank you for taking my questions.

Thank you.

Thank you and I'd like to turn the floor back over to Angeliki frangou for any additional closing remarks.

Thank you this complete two cities.

Thank you ladies and gentlemen, this does conclude today's conference call you may now disconnect.