Q2 2021 Navios Maritime Holdings Inc Earnings Call
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Joining navios Maritime Holdings second quarter 2021 earnings Conference call. We are pleased to host this call from the Cayman Islands with US today from the company are chairman and C. Essentially you Frankie Vice Chairman, Mr. Ted Petrone, Chief Financial Officer, Mr. Georgia.
And senior Vice President of strategic planning, Mr. Dennis Cary anxious.
And the cool aid to MS. Lori Aikman, who will take you through the conference call details and Safe Harbor statements. Thank you as a reminder, this conference call is also being webcast to access the webcast. Please go to the investors section of Navios Maritime Holdings website at Www Dot Navios Dot com, you'll see the webcast link in the middle of the page.
A copy of the presentation referenced in todays earnings conference call can also be found there.
Now I'll read the Safe Harbor statement. This conference call could contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 about Navios Holdings forward looking statements are statements that are not historical facts such forward looking statements are based upon the current beliefs and expectations of Navios Holdings management and are.
Subject to risks and uncertainties, which could cause actual results to differ from the forward looking statements such risks are more fully discussed in Navios holdings filings with the Securities and Exchange Commission. The information set forth herein should be understood in latest address Navios holdings does not assume any obligation to update the information contained in this conference call.
Agenda for todays conference call is as follows we will begin this morning's conference call with formal remarks from the management team.
We would like to Nicole to take questions now I'll turn the call over to Navios Holdings, Chairman see essentially keep shrinking and Julie. Thank you Michael and good morning to join US on today's call I am pleased with as you asked for the second quarter of 2022 and in Q2, Navios Holdings reported revenue of $149.0 million.
Adjusted EBITDA of $94.0 million and adjusted net income of $33 million.
And then I might as market demand strong supported by age of course.
Neither investment guidance.
Creating new high Capesize today close to $50000 less.
Panamax and supermax is about $35000 per day.
The increase in charter rates, we have also seen supervisors that is Europe.
Domestic that these days.
In the near term demand remains strong and the Morgan Stanley within their CCM logistics chain for the dry bulk commodities. Please turn to slide three for an overview of the Navios traction.
You can see Navios holdings, but as the MTA Banca vessels with an average age of 8.6, yes.
<unk> continued to grow in both business developing could ease of getting pressed for time shaping me now engrained lean and other commodities.
Companies are leading infrastructure and logistics company in the hemophilia agent Navios Holdings main things.
63, 8% ownership in Navios, South America logistics.
It's five minutes that they shouldn't be announcing to measure.
The combined entity will become the largest U S publicly listed shipping company by a number of that we know about that Santos is clean and neat Oh they do.
Bye bye.
Tennessee and think I sectors. We are excited about this transformational transaction and therefore this environment too and then grow.
For my father to manage it.
And then when we own about 10.3% ownership in NMM was 95 when they come in.
On September.
2021.
Slide four you can see what a GDP growth season, 1970, global GDP growth for 2002, and two and is projected to be 6% and four 9% interest in 'twenty two.
Hi, Scott good to.
So here goes I think all of this in the past 50 years in that 10.
10%. This is denise masks, the potassium impact normally than global GDP 22 empty. It was about 85.3 million compared with two three.
1970 in fact expected 22 on July <unk> is almost two times then die in DTC.
In 19 seventies.
One is continued economic and a coffee despite basketball, but honestly the big loan that guidance level.
Knox behind previous highs.
We believe these historic high points demonstrate that the beady eye and then died bulk market can continue to increase as we work through ongoing. So do you think these adoption posed by the pandemic.
Slide five highlights our recent developments for the first half of 2021, we generated $266 million.
And then it has a $14.0 million in adjusted EBITDA and $26.0 million net income.
During the second quarter, we generated $149.0 million Internet of thing.
$94.0 million in adjusted EBITDA and 30.
One 3 million and that does take net income during the second quarter. We also had seen an average time charter rate.
29511, five capesize vessels 17531 Panamax vessel.
<unk> thousand 474.
The housing market.
We highlight our strong cash flow potentially from the second half of 2021.
6891 available days and about 50% of them open or index linked we can take advantage of the strong dry bulk market and then any significant additional free cash flow.
As an update on our ongoing debt reduction we have successfully reduced debt by $255.0 million, so far in 2021 and year to date.
So the activities in the 200 <unk> eight version for $155.0 million Lastly, I want to highlight one small they recently announced Navios partners Navios acquisition merger.
Finding these two companies creates a single entity operating in three segments dry bulk tanks.
Tanker and container ships.
The entity will be strong at NYSE been able to mitigate sectors cyclicality.
Cyclicality, the combined entity, we have asset value over a four.
Enterprise revenue exceeding $4.0 billion and a market cap of nearly.
Navios holdings with pinpoint any person on it.
In the pro forma for the merger.
I think further details here today deleveraging efforts as I previously mentioned, we have successfully reduced our debt by over 251 million. So far in 2021, when he deemed the $100 million of 11, a M. At the senior secured notes and it's fair to say another $24 million okay.
D C mortgage note the remaining 170 million in debt reduction comes from the repayment of a $17 million.
Navios logistics loan and a $50 million.
As you can see from the chart below our deleveraging effort resulted in a 22, 4% debt reduction year to date slide seven goes through they said to me if it kind of any upside from our fleet for the second half of 2021 as you see from the bottom chart, we have $80.
$2.2 million.
In expected fix revenue.
They are faced with and a lot of animals.
Thanks.
From the biologics expansion over 6000 Aps founded in 91 available day was that open or index linked in the second half of 2021.
Back to $147.0 million of ambition I, assuming that guidance right.
And in the table, even being a total revenue of $232.0 million or time chartering in $2754 per day for the second half of 2020 one.
The dry bulk market remained strong and our fleet is revenue position to take advantage of any available margin.
Alright.
Like our liquidity position as of June 30 of 2021, and net debt to book of <unk> was 95, 6%. We had cash of $75.0 million I will come back now to turn the call over to Mr. Joseph No. It isn't obvious calling CFO John Thank you again.
Please turn to slide nine.
Holdings financial highlights for the second quarter and first six months of 2021.
Adjusted EBITDA for the quarter was more than three times higher than Q2 and kind of chunky.
$14.0 million compared to $29.0 million in trying to trend.
EBITDA and net income for the quarter were adjusted to exclude $9.0 million impairment losses relating to four vessels.
EBITDA and net loss for Q2.
Adjusted to exclude $9 million impairment losses on two vessels.
Impairment losses.
Hi, gentlemen.
The increase in adjusted EBITDA reflects the significant improvement.
In 2021.
We achieved in the quarter was almost three times higher than Q2.
The improvement.
Reflected in the net income of the company.
During Q2, we recorded an adjusted net income of $33.0 million compared to adjusted net loss of $25 million in Kenya.
Moving to the first half financial highlights adjusted EBITDA for the first half of 'twenty to 'twenty one.
<unk> was $106.0 million compared to $64.0 million in the first half of Kenneth Kennedy.
<unk> hundred 42%.
TCE rate achieved in the first six months of Kenneth if anyone was almost five times higher than in China.
EBITDA for the first half of 'twenty.
Adjusted to exclude $34.0 million in equity income affiliated companies due to the emergence of Navios partners, Navios containers, and $34.0 million impairment losses relating to.
Seven vessels.
EBITDA for the first half of the N attendee was adjusted to exclude Covid $2 million impairment losses.
Two the sale of four vessels 18 point something million impairment relating to Navios Europe, II, both directly and through our affiliates.
And $4.0 million impairment losses.
Adjusted net income for the period was $26.0 million compared to an adjusted net loss of $22.0 million in the first half of Tinder trend.
Moving to slide 10.
Hi, guys.
As of June 32000.
On.
<unk> cash balance was about $73 million compared to about $111 million at the end of December.
Following our deleveraging efforts long term debt, including the current portion reduced by about $98 million.
Reduction does not reflect the 100 yards samsonov, 11.25% senior secured loans that took place in Q3.
Please turn to slide 11.
This partnership allows this merger with Navios acquisition.
Format for them answered Matthew's holdings will own 10, 3% of dementia.
With an estimated market value in excess of $90 million.
These partners will become the largest publicly listed company.
Our fleet of 143 vessels about evenly diversified that cross dry bulk container shipping tanker segments.
And this woman cant presentation at this point I will turn the call over to Jim Scott This fall season.
Navios South American logistics results Dennis Thank you George.
Slide 10 provides an overview of Navios logistics marketing logistics fleet.
Which are complemented by our barge fleet for expertise and product tanker fleet.
David Please.
Please turn to page 15.
In the second quarter of 2021.
Could you make 20% to $28.0 million on our operating performance.
By yourself Cabos market academia week ago, Mccormick environment in Argentina, because of COVID-19.
Thank you Nathan good even aggregating conditions due to lower orders.
These adverse conditions.
I think Samsung.
Important asset inward amero, and why we think that even on logistics chain.
Our board is located three miles of rainy River.
<unk> block has been unaffected.
Compared to Argentine good EBIT boards suffering from AEP year low water levels in the <unk>.
Yes.
Q2, 2021 Port segment, EBITDA decreased by 4% to $18.
The decrease was mainly Anthony believed to reduce siekman of Paraguay and grades.
As water levels in the final 90 will continue to drop in the third quarter.
Major customers have been divesting certain cargos, which would otherwise have been sent to Argentina to onboard.
Fixed income bond basketball loading dock almost to meet this higher.
We believe that these competitors that demand does not only with our board on grain Board performance this year.
Have long lasting effects as customers enhancing manner.
On logistics requirements.
Well the iron ore side from the amount of contract we haven't had revenue, but at a minimum guaranteed quantity of 4 million tons per year.
We continue to talk things through our terminal during the quarter moving now to 200000 tons.
The strong demand for iron ore both violent.
Export volumes from <unk>.
Sydney affected by low water levels in the system.
In the box segment, Q2, 2021, EBITDA increased 25% to $12.0 million the.
The increase is.
Mainly due to higher revenue from liquid cargo transportation.
Our recently acquired liquid barge fleet with a take or pay contract for transportation of liquid cargos on Hawaii.
This trade is less affected by low orders compared to the transportation of iron ore from <unk>.
Yes.
The lower than average however, our Mexican manufacturing operation and perfect BP as parties have limited carrying capacity and reduce the cost and trees are taking longer to be completed.
Increased volumes experiences deliver conditions continued to be difficult during the third quarter.
In our comparable business Q2, 2021 decreased to minus <unk> 5 million.
$6.0 million in the same period last year.
Kris you due to lack of employment for some of our vessels during the quarter because of weak economic environment due to COVID-19.
For Q2, 2021 loans for the quarter was <unk> 8 million compared to $20.0 million bromine in the second quarter of 2000 and clarity.
The decrease is attributable to lower operating profit.
Finance costs, mainly due to New York Senior notes.
Turning to the financial results for the six months period ending June 32021.
<unk> decreased 4%.
Decreased 9% to $48.0 million and profit was $8.0 million from $26.0 million in the same period last year.
Please turn to slide 14.
Navios logistics has no significant maturities until 2025, our bond is trading above par yielding six 7%.
GAAP and cash equivalents at the end of the.
The second quarter of 2031 were $52.0 million compared to $83.0 million at the end of 2020.
Net debt to book capitalization was 59%.
As previously announced in July Navios logistics subsidiary getting more adventurous.
We received full repayment of the outstanding balance or the $70 million alone.
<unk> holdings in cash and shares of Navios Holdings subsea.
Subsequently numbers and logistics declared and paid a dividend to its shareholders SaaS on grid Mod.
I would now like to turn the call over to Tom. Thank you. Your Highness. Please turn to slide 15, Slide 15 presents our diversified dry bulk fleet, consisting of 38 vessels totaling $5.0 million deadweight.
12, Capes 21, Panamax four Super Max and one handy size average ages of fleet is eight six years, 20% younger than the industry average.
This group total fleet of 189 vessels includes 93 dry bulk vessels 53 tankers and 43 container vessels.
Please turn to slide 16.
Slide 16 highlights our ESG initiatives Maritime shipping is the most environmentally friendly means of transportation.
As it is the most energy and carbon efficient mode of transportation of transport, we aspire to have zero emissions by 2050 in this process, we havent been pioneering and are adopting certain environmental regulations up to two years in advance and we aim to be one of the first fleets to achieve full compliance notice a socially conscious group, whose core values include.
Diversity inclusion and safety.
Entail policies or procedures that provide effective corporate governance.
Clear code of Ethics. Our board is composed of majority of independent directors and independent committees that oversee our management and operations.
Please turn to slide 18.
Q2 index average of 2000, and 793 was more than double any Q2 quarterly average in the past decade more recently rates in all asset classes have risen sharply, reflecting surging trade driven by strong demand for both major and minor bulk commodities.
The Baltic exchange dry index broke through the 4000 level the highest since 2010 earnings for sub Capesize vessels reached multiyear highs spine.
Supply and demand fundamentals going forward remain extremely positive.
Strong demand for natural resources, combined with Covid related logistical disruptions, which adds to fleet inefficiencies and a slowing pace of new building deliveries all support strong levels of spot and future freight rates.
The IMF projects global to 2021, GDP growth of 6% the highest in 50 years led by an eight 6% expansion in China, India and developing Asia. Accordingly, 2021, dry bulk trade is projected to increase by 4% and further increased by one 7% in 2022.
Turning to slide 19 demand is forecasted to outpace net fleet growth at both 'twenty, one and 'twenty two the graph on the left shows that dry bulk demand for the three major cargoes of INR coal and grain for the second half of this year is forecast to increase by 7% compared to the first half of 2021.
The graph on the right highlights to previously mentioned slowing fleet growth net fleet growth is forecast to be three 3% this year and only one 2% in 2022.
Turning to slide 20.
Post pandemic stimulus measures in the advanced economies and increasing industrial production and economic growth in China fueled demand for iron ore global oil demand is expected to increase by three 6%. This year. Additionally, availability of Atlantic exports to China in the second half of this year.
To increase our steel mills, replenish stockpiles, increasing ton miles and driving demand for capesize vessels.
Forecast there also for growth in iron ore imports around the world as this affects depend demick recede Europe's imports are expected to grow by 18% and Asia, Excluding China is expected to import 12% more iron ore in 'twenty, one that in 2020.
Please turn to slide 21.
Asian coal imports, which account for over 80% of the world's seaborne coal trade are expected to increase by three 7% in 2021.
Adding to the IEA the International Energy Agency Global coal fired electrical generation is expected to rise by nearly 5% this year and exceed pre pandemic levels before increasing a further 3% to an all time high in 2022.
Turning to slide 22, an ever increasing world population food security issues, driven by the pandemic as well as increasing protein demand worldwide continues to support global grain trade world grain production. This year will reach a record according to the international grains Council and the USDA.
Worldwide grain trade has been growing at 5% CAGR since 2008, mainly driven by Asian demand, which increased by 15, 5% in 2020 and is forecast to grow by a further six 9% in 2021 overall total world grain trade is expected to increase by four 4% in 2021.
Please turn to slide 23, the current order book stands at historically low five 8% of the fleet.
Contracting for all 2020 and year to date combined has been low about equal to or contracting in 2019. According to <unk>. Accordingly, 2021, net fleet growth is expected at three 3% and only one 2% in 2020 to below the projected increase in drybulk demand for both years.
Turning to slide 24 vessels over 20 years of age are about eight 8% of the total fleet, which compares favorably with the previously mentioned historically low order book.
Scrapping totaled $23.0 million tons in 2020 and year to date has totaled $10.0 million tonnes, which is on pace for yearly total of about $14.0 million tonnes.
In conclusion positive demand fundamentals, mainly due to strong restart of economic activity around the world along with reduced fleet availability should continue to support the dry bulk industry as it continues.
Efforts to navigate through this easing pandemic storm.
This concludes my presentation I would now like to turn the call over to Angela for final comments.
<unk>.
Thank you Dan this complaint that's one of my presentation, we open the call to questions.
At this time, if you would like to ask a question. Please press the star and one on your Touchtone phone you may remove yourself from the queue at any time by your question about key once again that is star Antoine if he would like to ask a question and we will take our first question from Omar <unk> with Clarksons Clarksons Securities. Your line is now open.
Thank you Angela and good morning, and good morning team.
Hello.
Yeah, Hi, I had a handful of questions for you today and may be just firstly thinking in the grander context of Navios holdings, especially with NMM merging with M&A and creating a large.
Strong footprint under one umbrella how do you think about holding long term.
One is IPO logistics still a priority.
And two could you see holdings staying at the Holdings company long term or do you see that potentially down the line also joining up with with any of them.
Hello, everybody.
If there is something to announce.
One thing about <unk>.
Hey, Pete.
Our guidance company you may have a large dry bulk fleet, but you also have it might be the HFC D in Navios logistics.
Do you think.
It was basically as conservation importing close actually.
And and logistics in.
In South America so.
So theres nothing nobody yourself now.
I think one of the things I like to say is that I'm not following is benefiting from the very strong dry barge market.
Increasing cash flows and asset values are rising.
And demand.
The demand for dry bulk commodities.
And it will remain that.
Of not only demand that also there continues.
Logistics.
And Jonathan.
So I think this is on the dry bulk market.
Yeah.
The business, we have in South America, I think as you know we have a randy on.
The company said before capital markets of course, we see that as market conditions.
This guy I mean.
That's going to be adding in South America.
Because you'll have that either.
It is challenging and generally got them market of course here you go.
Fourth I mean.
And my zeal that provides us a decent level.
What are the levers and we absolutely are having to meet their needs.
Yeah Damian side.
Thanks Angeliki.
Then maybe just separately regarding the debt maturity next year, obviously as you highlighted rates are up cash flows are rising and you've got a significant increase in your asset value.
Or any color you can give on the potential refinance of the bonds can you see.
Obviously, it seems that the banks are traditional lenders have become much more interested in lending to the shipping market.
Do you think about the refinance of the bonds can you envision.
Doing a refinance with just straight up conventional bank debt or do you also see coming to the capital markets again.
And then we added.
All of that helps us I think.
What I would tell you is that we have seen a significant increase.
And the values.
And it is something that will continue in the works to add one if you see that that is Jonathan Ho.
The market is developing.
It seems to us that.
Of course, there's always a decent I mean, good relationships with banks and leasing company. So we have.
Sure.
Financing songs.
And.
Yeah.
Right.
We've done a lot of work you have seen that we have.
And then use that data to kind of that system.
On a year to date, we have seen that way.
Yes definitely.
And maybe just one final one for me just wanted to ask about the purchase options you've got on the vessels chartered in I believe Theres 13 currently in place, presumably some of the some of those or potentially all of them maybe in the money just given the increase in values. We've seen this year.
Any sense or color you can give on whether these options are.
Planning for the exercise or how how much in the money. They are any color you can give there.
This guidance, but those you know there are multiple node someone's ESG options.
Sure.
Exercise them on a different.
And also one thing I can give you a color is that the Japanese.
Japanese.
Hi.
It also creates a huge advantage to us.
It is something to be exercise that you know this is a portfolio we monitor constantly.
We have you been that'd be the only cash flow wise to extend.
No we have not.
Not only do their job.
We have optionality, yes.
And also we have.
The exercise of the options Betsey Johnson amazing different endpoints.
Portfolio, we follow it very well.
I mean I think.
Right.
Obviously, you have been in the maritime industry for some time now.
And then associated with that.
The market would have exercised the option.
And more recently.
And we have done by suddenly and adoption.
Gotcha.
Yeah.
It'd be difficult to give you that now.
This is Amy multiple here.
It can be done either cash flow or.
Such results.
Got it yeah, well clearly definitely.
Some value from them just given how the market transitions here.
Since the beginning of the year.
Good well, thanks, Thanks, Angelica I'll turn it over.
Thank you.
And we have no further questions on the line at this time I will turn the program back over to <unk> for any additional or closing remarks.
Thank you this completes our call.
Thank you.
Okay.
This does conclude today's program. Thank you for your participation you may disconnect at any time.
Okay.
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