Q2 2020 Navios Maritime Acquisition Corp Earnings Call
Thank you for Genesco Navios Maritime acquisition Corporation's second quarter Twentytwenty earnings Conference call. It does today from the company, our chairman and CEO and essentially keep Frangou, Vice chairman Mr. debt to Toronto, and Chief Financial Officer Miscellaneous code.
As a reminder, this conference call is being webcast to access the webcast. Please visit the investor section on that is acquisitions website at www Dot Navios Dash acquisition just call.
You will see the webcast link in the middle of the page and a copy of the presentation referenced in todays earnings conference call will also be found there not I will review the Safe Harbor statements. This conference call could contain forward looking statements that meetings of the private Securities Litigation Reform Act with 1995 about Navios acquisition.
Forward looking statements such statements that are not historic FX.
Such forward looking statements are based upon the current beliefs and expectations of Navios acquisitions management and subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements such risks are more fully discussed to navios acquisitions filings with the Securities and Exchange Commission.
The information set for Kirin should be understood in light of such risks Navios acquisition does not assume any obligation to update the information contained in today's conference call.
The agenda for today's call is as follows.
This time, we will offer opening remarks, then mr. Peter on one given operational update and industry overview next mr., Chris or a few navios acquisitions International shots and lastly, we'll open the call to take questions now I turn the call over to Navios acquisitions, Chairman and CEO Mrs. Angeliki Frangou.
Thank you Doris good morning story of he will join us on todays call and why that pandemic has greatly affected businesses guarantees as being oil until all the anomaly family, especially for years, we've made great strides in the safety reliability and those have adapted to this ever changing environment.
I am pleased with our results for the federal border States lately.
This orphan Navios acquisition.
All this and averaged just over $102.2 million and adjusted EBITDA of $72.7 million.
Representing increases of about 92% and 229% respectively over it good to have to empty magazine and then they recorded adjusted net income of $32.4 million or $2 and 0.3 cents.
But I'd say at or close to it.
We declared a quarterly distribution of 30 cents, especially as for the second quarter.
Slide four represent some of our company side and then they cause a 54 vessels today that includes 47, the first I guess and seven it got their message. They said it was all day message enter into our.
Our settlement over the same level is going very well data analysis tool and William Dan to show that the average age of I sleep is nine years old our chartering strategy continues to protect us from any downside, but also allows to participate in that market upside.
Slide five they like what they expected recovery in global even man to the second half of Twentytwenty. After they see we have dropped in all in demand doing good to have two at between the demand is expected to increase by 14% in Q3 only Piedmont in the second half two I think Randy is expected to outpace.
For example of 22 assay, but 8.2%.
Oh safety as well as non oilseeds lead candidate focused oil demand growth by 3.5, and 3.8, new buyers, but that day, respectively and sign now or in the market is expected to live by 1.2, but the two maybe on advice, but they are desperate.
In the second half of 30 to 80 compared to the FX up.
Hi, six hi, zero last fall that mandate that that is for the VCC vessel.
<unk> percent over that globally VCC slate is being used as slow installer did even by low oil price and we aim to give any land stores capacity. They really feel that book is at its lowest level since 1990 feet in fact that guy and we actually see orders.
Book is less than that Guy and we actually see fleet that is a 20 years or all the agency ton mile demand is increasing at Atlantic export the refinery capacity expansion in China, and they had increased demand for gradually as from there.
Actually I think long, but he's got him it is out.
Seasonality is currently at best into that aid as you're going to save from the job at bottom up there.
But the fundamentals are favorable.
Our board a bomb them today going into 2021.
Yeah. It's seven shows Navios acquisition good development in Q2 of Twentytwenty The company they call. It an adjusted EBITDA of $72.7 million or they have 230% increase compared to 82.1 million recorded in Q2 or.
2019, our chartering strategy focuses on upside participation and we had 20.7 million in profit said setting in the second quarter of two I think 20.
Hi, downside is also protected by adaptive concert with quality counterpart.
For the second half authentic lending was up 74, but in terms of available basically.
Oh wait 92.1% include Blowflies setting.
During the quarter, we successfully liquidated a restaurant as a good navios Europe to ankle, but its 37.7 million publicity about bush owed to us into still viable and Scott.
We'll take two S 92.9 million or any refinancing for six fold up I guess extending the debt maturity to two I think 27.
And we expanded that the FCC slate was one additional aggressive bringing that up to four newbuilding vessels and the if they're both east with knowing nexium GAAP that it out to me.
The net present value of the differential between their basketball team and John that out today for the three really says is estimated at about 65 million adoption.
Slide eight these days I have cost reduction for the remaining six mam software dipped to empty, we got rapid 74% of variable date at that after they have 19006 dominant $22 per day.
It is contracted today exclude both decile profit setting for about 1769 days.
Actually God I want to hear time charter rate on a profit sailing days are contracted out the rate was increased to $22118 Betsy.
Our total cost for the same period is expected to be.
$18363 per day, we now 2018 open that's floating rate today.
Which gives us a breakeven on $14775 per open day.
I thought I would also.
Good operating expenses, the docking amortization bareboat in cost generally on at least a deep expenses interest expense and GAAP Italian repaid.
Slide nine shows our cash flow, what they're telling for the second half of Twentytwenty for their remaining six months Atlantic Wendy I contracted revenue, excluding any profit setting is estimated at $816.2 million.
And then they touch 48.1% of available days with market exposure.
And they break even late $14775 bad open and floating at eight day.
As shown in one year time charter rate for a market exposure today, we expect to generate 18.9 million operating cash flow through the they recovered to 20 year average and eight will generate at 35.6 million of operating cash flow.
Hi, Ben shows or is it liquidity position as of Q2, Twentytwenty, our cash by not a $68.5 million as of June Thirtyth Twentytwenty had net debt to capitalization is 72.9% we'd have fully funded I will come back and want to know.
I would have any significant debt maturities and David Q4 of 2021 and at this point I would like to turn the call over to Mr. that federal Thank you and you're Lucky and good morning. All please turn to slide 12 in December of 2019, Navios Maritime acquisition took delivery of five prototype as long as liquidity should have nervous.
Europe, one that was actually this is diversified fleet now consists of 47 vessels with an average age of nine years totaling 6 million deadweight fleet consists of 14, Vlccs 10 of our ones 18, or more twos and threes more ones product tankers to chemical tankers.
For the deal fees or bareboat Newbuildings on are scheduled for delivery in Q4 of this year Q1 in Q3 of next year, what's the last one due in 2022.
In June of this year Navios Maritime acquisition took delivery of seven Containerships of approximately 18400 to your capacity fire liquidation of Navios Europe two container ships on noncore assets that are held for sale. Please turn to slide 13.
Slide 13 details, our chartering strategy, which we used to balance market opportunity a credit risk, we see protection from market volatility by attending charters have different durations in order to better manage markets cyclicality for the second half of 220 20 about 74% of our fleets available days are fixed at a base rate or the base rate plus profit sharing.
And about 11.5% of fixed on floating rates.
As a result of this strategy Navios fleet enjoy significant downside protection as well as the ability to participate in the upside with about 48.1% of our fleet days exposed to market rates. Please turn to slide 14, Navios acquisition continues its policy blocking and secure cash flow with credit worthy Counterparties are fleet has secured about 489.
Million dollars and long term contracted revenue continue to extend the coverage of our fleet via new fixtures continuations exercise optional periods at current levels, including profit sharing in some cases, please turn to slide 15.
Hi, 15 chosen detail our current charters with their expected expiration dates our chartering strategy revolves around capturing market opportunity. While also developing dependable cash flow from a diverse group of first class charters.
Please turn to slide 17.
All right glow continuing to be affected by the pandemic.
Hi, Matt projected global GDP contraction of 4.9% in 2020.
Led by 8% contraction in advanced economies governments have put in place unprecedented emergency monetary and fiscal plans to support their economies in light of this the IMF projects, 5.4% global GDP growth in 2021.
Yeah, Hey projects the global oil demand decline of 7.9 million barrels per day for 2020, which is 1.6 million barrels per day improvement over the April forecast. The a forecast for 2021 is an increase of 5.8% or or 5.3 million barrels per day.
Please turn to slide 18.
As the graph on the left a decline in oil demand for the first half of 2020 combined with an oversupply resulted in Oh, we see de crude oil inventories ballooning to reach 330 million barrels above the five year average near term economic outlook is improving as countries have emerged from quarantined encouraging OPEC.
Plus to increase production quotas starting in August assuming demand continues to recover and OPEC plus maintains disciplined on start stated cuts stock draws should accelerate through the rest of 2020.
For the graph on the right twin supply and demand oil shocks brought about a price collapse in crude oil as well as a contango in oil futures. The result triggered a rapid floating storage booking short and medium durations.
Currently there are 98 vlccs on floating storage, which is about 12% of the fleet. As noted this number is unchanged from may.
Please turn to slide 19.
China is the world's largest import of oil and the second largest consumer oil importing over 70% of its requirements Chinese imports have increased over 300% since January 2009, representing a 13% CAGR.
Chinese crude imports averaged 10.8 million barrels per day for the first half of 2020.
10% increase over the same period last year.
As you can see into table blow on a per capita basis. The U.S. oil usage is 5.8 times out of China European usage is 2.7 times and World usage is 1.3 times.
If China goes just to world.
But consumption levels.
China would require an additional 164 vlccs.
You mean, all crude is imported by see this represents an expansion of existing fleet by about 20%.
Please turn to slide 20.
You as crude oil production, although down from its record levels of 12.9 million barrels a day in Q4 of last year's still continues its elevated levels coming in at 12.1 million barrels per day in April.
Level of production combined with reduced demand has and should continue to allow us to export crude in the future. Additionally, other Atlantic Exporters' led by Brazil plan to increase crude exports more than offsetting any declines from Venezuela, Mexico and Nigeria.
2025 at least 25% of Asian crude oil imports will have to come from the Atlantic basin, increasing voyage length as Asian countries depend on imports for between 75 and 97% of crude consumption.
China, India, and other Asia will expand refinery capacity by 3.9 million barrels per day between 2020, and 2022, representing 58% of all expansions China in particular has a growing supply gap domestic crude production continues to decline as refinery expansions continue.
During this current plan refinery expansion to 17.7 million barrels per day capacity in 2021 translates to an additional 231 million barrels of crude oil needed, which would require an additional 29 VLCC real ccs to the fleet.
Please turn to slide 21.
Net fleet growth through June equaled, 2.7% with 6.7 million deadweight deliveries against point 6 million deadweight removals.
Projected net fleet growth for 2000, 23.7% newbuilding deliveries reduced dramatically. After year end. This decline can be partially attributed to onus hesitance to order long lived assets in light of macroeconomic uncertainty and engine technology concerns do the upcoming Seo to restrictions.
Please turn to slide 22.
While the order book shows 58 Vlccs as of last week. There are 62, Vlccs 20 years of age or older. We note that the current order book of 7.4% of the fleet is the lowest since 1996.
With the IMO 2020, and ballast water management regulations that will lead to some vessels retirements. After the current disruptions, we believe that the order book and fleet or well balanced. Please turn to slide 24. According to the eye a refinery capacity is expected to increase by 9.9 million barrels per day from 20 to 20 to 2025, including all additions expense engine upgrade.
It's over 70% of that capacity will be added in Asia, and the middle East with the Ita projecting China, another non or we see the Asia to increase refinery capacity by 4.7 million barrels per day with the middle East, adding a for the 2.4 million barrels per day. Please turn to slide 25, U.S. crude production increases along with refinery expansions and.
Lets Gulf has led to product exports from the U.S. rising by 536% since the beginning of 2004.
This has become a net exporter petroleum products and continues to export significant quantities of products to Latin America, and the far east.
U.S. product exports hit an all time peak of 6.3 million barrels per day. During the week of April 4th of this year declined to 3.7 million barrels per day as cobot 19, Lockdowns took hold but have rebounded recently hitting 4.9 million barrels per day for the week of July 17th.
Please turn to slide 26, an average of 11.4 million barrels per day refining capacity is forecast to have been taken offline for maintenance in April and May of this year.
About 6.1 million barrels per day higher than the 2014 to 18 five year average.
These changes are being implemented in anticipation of revival in demand as cobot 19 related lockdowns and around the world oil demand begins to rise.
Please turn to slide 27 gasoline demand has increased as cobot 19 Lockdowns of ended in particular Chinese demand has risen above the 2015. The 2019 average as commuters show a preference for driving amid concerns over social discuss things on public transportation.
For a number of weeks traffic across Chinese cities has been at or above 2019 average levels traffic congestion is near covered levels across France, Germany, Switzerland, and parts of Italy. Please turn to slide 28. The first half of 2020. The fleet grew by 1.5% on deliveries of 3 million deadweight less a half a million deadweight have done the lessons.
Projected net fleet growth for 2020, it's only 2.4%.
About 6.4% of the product tanker fleet is 20 years of age or older.
As of July 1st 2020, there were 191 product tankers on order and 459, which are 17 years, an age or older.
Total order book is much less than those ships 17 years and Asian holder. Thank you. This concludes my review I'd like to now turn the call over to lean into scores for the Q2 financial results. Thank you then I will discuss the financial results for the segment recorded in the six month period ended 2220.
Instead slice it.
Revenue for good Twoq Ltwenty increased by 91.6% 212.2 million from 58.6 million in Q2 2019, reflecting the very strong back in market during the quarter.
The second quarter 2020 will have 99.2% leasing utilization, we assumed at that time webinars for $28187 per day much improved from the $16525, but didn't seem in the second quarter 2090.
Time charter and we'll use expenses were 3.5 meter operating expenses were 29 for me noon and seeing the expenses were 6.3 million EBITDA for Q2, two twentytwenty increased by 196.6% to 72.6 million from 24.5 million into 2009.
I'd say that we reported a net income of 51 million Workday Lola 95 cents per share.
Turning to the financial results for the six month period ended June 3200, 20 revenue increased by 54.8% to 210.1 million from 175.7 million last year, reflecting the times hasn't even $26359 and then.
The macro Samplings magazine.
Operating expenses were 59.7 million NCM may expenses within one to me.
I would like to remind you that always nice were negatively affected into on 2020 by 13.9 million relating to these then they go Tonight in the company's receivable from Navios Europe to which was liquidated during the second quarter.
Adjusted EBITDA for the fiscal of 220 increased by 103.5% 229 million from 63.4 million in 2019.
This isn't the amortization was 53.2 meals and they seem to this expense in finance growth was 43.5.
Adjusted net income for the six months will strengthen Randy was 47.2 million or $2.98 per se.
Slide 31 provides selected balance in data as of June 20, Glenn.
GAAP and cash equivalents, including restricted us were 68.5 million.
This is net book value was 1.3 billion.
Total losses amounted to 1.6 billion.
With that did absolute integrated venting was 161.
Net debt to capitalization ratio as of June 30 improved to 72.9%.
Following the lingering Daicel Navios Europe to Navios acquisition was allocated 8.9 million in cash and seven point they message with their associated will be done Navios acquisition through 41.7 million under a new thought that really facility secured who the seven contingencies steadily Bain 45.
1 million overseas business.
This is gone this fall asking for say the assets and liabilities associated with them are included in other assets and other there's been this expectedly.
Both Q2, Navios acquisition expenses 5 million or Vincent Mogas note for the growth of 2.9 million.
Instead to slice it into.
As we look you mentioned the second order we concluded financings over 92.9 million extending maturities due to ended with you said. This finance consists of 72.1 medium sale and leaseback arrangement to finance both product package will be paid through a video is a full seven years equal sake.
With these quarterly installments with I mean, there's one lybrook last their margin of 392 410 basis points will.
Depending on diversifying.
And 20.8 medium bond financing for two product tankers, which will be repaid through a videos of for use in consecutive quarterly installments within into this organized world class 300 basis points.
Turning to slide 53, absolutely then of course, because emphasis on this for the second quarter, we declared a dividend of 30 cents per se.
These then we'll be stayed on October eight 2022 said wonders whether they're good answer them before 2000, blending and now I would like to bus is going to Angeliki for final remarks.
Thank you Leo.
This completes our formal presentation I will open the call for questions.
At this time, if he would like to ask a question. Please press Star then the number one on your telephone keypad that start the number one to ask a question.
Your first question comes from the line of Chris Wetherbee with Citi.
Hi, good morning games on for Chris.
Just wanted to touch on a raise the money just wanted to touch on the rate outlook that you'd given and some of the other <unk>.
How are you provided.
Do you think that.
Simply the turn in the improvement in time charter rates.
Relative to spot rates is based on seasonality in the implications of.
Refinery maintenance being moved forward to the early part of the year, where do you think that it's actually more or less built on sort of an expectation of researching demand just kind of wanted to understand if there's like a recovery built into that time charter rate that years.
Reference or do you think that it's more let's just status quo and sort of seasonality in some of the other trends just flowing through just kind of one get your thoughts there.
That's a good question I mean, basically we see and even though we came from a strong core that had to do not to do that store that we see that ER visits on you guys.
For the readily see that the fundamentals on that on that in the same thing.
Big picture, we have the lowest all that.
Not 75.
This is over 20 years away.
More than the vessels on all of it.
We have talked about 10 of them.
Lastly, I still ask which again anymore.
And then importantly, you'll have a then he's done my demand.
That's not.
Export.
See they find any capacity.
In China.
So basically you have no that well.
Their knowledge and you have and those of US dollar that that even if you have what do you still as I.
And you will have another whole there on that right.
More on that.
He's on Daniel.
Do they clean out any bad this wonderful.
Got it do you think that mostly that sort of the pickup is based on sort of the supply side more than the demand side, if I'm understanding your comment correctly.
Yeah, Hi, this is Ted I think you're absolutely right I think that.
Very rarely do you get that.
I'm trying to write to double the spot rates.
On the these right and on the on the on the I'm always you know the I'm or is it picked up a bit in the Atlantic in the Pacific.
Atlantic, It's all U.S. rider Big stock drawdown in crudes yesterday, which is a good sign for the market higher than expected and a refinery maintenance is a refinery utilization is really jumped up in the Gulf and there's a lot of export demand in the Atlantic.
You are looking at some amar's now getting graduating rates as you go out further right. The first three or four months is lower it kicks up wasn't the smart money right. We say is the shorts is coming in now to pick up tonnage because.
Everyone realizes the economies are recovering to a certain extent and and if demand goes up the price of the.
You're looking at time charter rates today for the these that are sitting around the 20 your average.
It could go higher come Q4.
Got it one more than one month, pointing that don't get 21, I mean, you have fundamentally.
Thanks.
Thank you for and don't forget that.
Thank you learn well GDP is actually going to almost 5.8.
So I can say strong they've got money going forward. So.
Basically even though we estimate.
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Uh huh.
Today.
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And it and it just a P.P.S.
Angeles' P.S. you know the order book is low.
But because of.
Engine technology concerns right IMO regulation Seo two issues.
That does it look like anybody's many jumping in anytime soon to be putting a new orders. So this order book should stay low for the foreseeable future.
That makes sense to me.
Yeah.
One kind of keeping all that in mind and sort of low risk.
Level, there's a lower sort of like outlook.
As of a rate ramp.
It does what do you touched on the capital allocation strategy. So right now you're.
And your dividend pretty substantial yield it seems like there's rather large.
Discount to NAV out there just how are you.
Well patient and shareholder.
Oriented capital allocation between the dividend in the buyback or a buyback.
Given the fact that there is this sort of ramp Hilton and sentiment seems to be fairly negative.
I think I mean, we already have a dividend policy sitting on a GAAP them allocation I don't.
I think we've seen more well that buyback or dead.
But you only thing that.
Got it actually I mean, so we have taken.
To go there yeah, we do find on.
Them long Beach.
We now and 29 or.
You know.
But then we did 90 me on a in Q2.
Yeah.
Okay. So you always it today.
On the job that's absolutely huh.
I mean they.
Yeah Dan.
Right.
You know I won't get to know.
Got it so I'm just.
And all the dividend something that you might consider reallocating towards.
During the debt back given the fact, given how much of a discount you're getting.
More so like I'm, just trying to understand sort of.
The cash flow for the dividend you see sort of a better opportunity for it and we are drought any portion of the capital structure. That's all.
Yeah, the jimena important.
Yeah.
So the company was right.
Yeah.
So.
It sounds to.
And I.
The caution today.
Yes.
And then you fine.
That is something that's about doing over the last two years something that.
One important buddy something that's working.
No I I am.
Yeah.
[music].
Got it and then just.
Couple of quick ones.
Turning to that refinancing de evonik sort of date that you're targeting for refinancing that November facility for 2021 GB expect something later this year is in the front half next year, just trying to get a sense of like the timing that you're working towards at the moment given the pandemic.
I think that in my mind just Wendy.
Yeah.
Yes, you know their own where they actively in the market.
Gosh constantly.
And walking them for saying I mean, I think you're doing it also particularly.
And.
Interesting quarter, where they know they look down.
On the you know very and that they have doubled in the we have the same.
That.
Got it and then similarly on the container ships do you have any idea when you might be able to liquidate those do you think that's something that happens in the second happens this year versus the first half next year do you think it might you can take longer than that.
We are on weekends infotainment something when I think magazine that then it would seem in north and fashion.
In the market.
[laughter].
Thank you for your time.
Thank you Ben Thank you.
Thank you I would like to turn the call back over to Angeliki.
It's going to be a second quarter n. Thank you.
Thank you. This concludes today's conference call you may now disconnect.