Q1 2022 Navios Maritime Partners LP Earnings Call
Thank you for joining us for Navios Maritime partners first quarter 2022 earnings conference call with US today from the company are chairwoman and CEO , Andrew Ritchie Frenzel, Chief operating officer, Mr. Charles <unk>, Chief Financial Officer, Arie surrounding and executive Vice.
President of business development, Mr. George Acne owe to.
As a reminder, this conference call is being webcast to access the webcast. Please go to the investors section of Navios Partners' website at Www Dot Navios Dash MLP Dot com, you'll see the webcasting link in the middle of the page and a copy of the presentation referenced in todays earnings conference call will also be found there now.
I will review 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 partners.
Forward looking statements are statements that are not historical facts such forward looking statements are based upon the current beliefs and expectations of Navios partners management and are subject to risks and uncertainties, which could cause actual results to differ materially from the forward looking statements such risks are more fully discussed in Navios partners filings with the securities and exchange.
Commission.
The information set forth herein should be understood in light of such risks Navios partners does not assume any obligation to update the information contained in this conference call.
The agenda for todays call is as follows first Ms. <unk> will offer opening remarks next.
Next Mr to see brief we will provide in Navios partners operational and fleet update overview.
Next Mr. Moroney, who will give an overview of Navios partners financial results.
Then Mr. <unk> will provide an industry overview and lastly, we'll open the call to take questions now I'll turn the call over to Navios Partners' chairwoman and CEO Ms. Angela Leaky friends out Angela.
Thank you Danielle and good morning to all of you joining us on today's call I am pleased with our results for the first quarter of 2022 during the first quarter Navios partners recorded revenue of $236 $6 million.
EBITDA over $126 1 million.
Net income of $85 7 million or $2.78 per common unit.
Italy, Ukraine as being at average by award in its third month with significant growth in human lives is also having an impact on global seaborne commodity trade Ukrainian adhere significant exporters of grain and other commodities and I see also exploded oil gas.
Call sanctions.
Sanctions and therefore have resulted in the displacement of those exports by other commodities being transported over longer distances, thereby adding to don't mind. The situation is fluid and we have no crystal ball to understand how this will evolve will evolve.
In the meantime governments and companies are quick to act to satisfy their short term needs as they consider long term bullish.
Please turn to slide three in 'twenty two it do on really margin the public sibling company. Today NMM is one of the leading U S publicly listed disciplined companies with an asset base diversified across 16 vessel types in three segments servicing more than 10 end markets.
About one third of our fleet operated dry bulk.
Containership and Tiger segments, and we believe that distraction offers.
A stronger more resilient entity to our stakeholders with a continuous opportunity for our creative growth.
As previously announced this quarter, we agreed to acquire four aframax and two tankage on the back of charter commitment from an investment grade counterparty through this transaction, we added a new segment with a reduce in east.
Excellent long term prospects.
Slide four presents some recent segment data and then fleet over 150 vessels and average age of nine five years and the loan to value of 28, 5%. The fleet has $4 1 billion of net equity value. Moreover, we'll have $2 8 billion in contracted.
Revenue or approximately 35.
500 available base for the remaining nine months of 2020 due almost half are exposed to market rate.
It provides upside through the ongoing recovery in charter rates, the dry and tanker market.
Slide five summarizes a few basic principles behind the diversified platform.
Number one we can optimize chartering in.
In segment offering attractive returns we can enter into period job is one another segment, we can be patient.
Segment.
Some counter cyclicality built game.
This creates the opportunity of redeploying the strong cash flow earned from performing segment into asset purchases in underperforming segments, where we believe attractive acquisition opportunities exist third asset value themselves can be volatile leverage today.
To remain low only be flaccid values cooperate we believe that by diversifying our asset base the balance sheet impact of asset value volatility will be muted kosher gradually our balance sheet strength will be partially based on this diversity.
Note that we are in a rising interest rate environment globally as Larry will discuss in a moment, we have been working I would say getting fixed rate financing and reducing the margin the margin Nova debt from about 300 basis points to about 200 basis points.
The cost of debt, increasing which provides yet another reason to be conservative with the amount of debt on our balance sheet.
On slide six.
Breakdown, how we optimize our chartering as you can see from the charter on the top right. The container segment is enjoying historically high charter rate. Most surprisingly we have fixed our container fleet on long term charters with almost 800 portion of our available container ship days fixed for the.
<unk> nine months of 2022.
This reduces market and a visually risk for these vessels.
Manav the credit risk of the long term chartered independently to ensure that we are not simply trading one risk for the novice.
Dry bulk segment, we benefit from a market where they are recovering to the historical 20 year averages we have fixed only 24% of all available dry bulk fleet days for the remaining nine months of 'twenty to 'twenty, two and we have opted to keep 76% of a vulnerable basics.
Post market grade to capture any available upside.
Chartering strategy also allow us to fix our dry bulk fleet on longer term charters when they do improve.
Lastly, we have 53% of our available cash.
Fixed mainly.
Mainly with favorable legacy charters.
We anticipate these.
These fleet on market grades and enhancing raise allow us to consider beer charters, we expect tanker fleet will generate strong returns once the market recovers.
As I mentioned, we not only have the luxury of waiting for this recovery, but also extend into subset of factors such as the aftermarket and that too given the strength of our other segments slide seven details our approach to capturing segment opportune P&L approach towards.
Bearing S&P activity with sector of an amendment and a man made $1 3 billion investment in 'twenty, two new building vessels that will deliver to our fleet through the first quarter of 2025, we will leverage the strength of the container market fresh resolved to 16 year old vessels for $220 million.
And second we had a 620 million investments in 10, New 5300, Teu container ships by entering into long term creditworthy charters for these vessels.
This 10 container ships will learn about $710 million and contracted revenue 452 years duration of the related charters.
And are currently worth about 20% more than our OLED prices.
We also engaged in a routine and continuously and management over <unk>.
The age profile in the dry bulk and Vegas space seven dry bulk and five tanker vessels were acquired at attractive prices.
In our dry bulk segment and amend made $332 million investment in seven new buildings order when vessel values were challenged in the first half of 2021. This relative I'd also worth about 20% more today.
Slide eight and introduced our this is a recent development in the first quarter.
2022, and then ma'am generated $236 6 million in revenue and $126 1 million in EBITDA and $85 7 million in net income.
During the quarter, we entered into a new tanker sub sector. When we agreed to acquire four new building Aframax and two vessels. These vessels are designed with the latest technology and can carry either crude or products. The pace acquisition price was $58.
$5 million per vessel and we will also pay $4 2 million more for additional.
Features and improvement.
The vessels have been chartered out for five years at a net rate of $25576 to an investment grade counterparty.
The five year period each of these charters will learn safety.
$33 million in aggregate EBITDA, representing a 10% annual year.
Keeping scrap value in mind at the end of their jobs.
Visual environment will be 31% of our purchase price while the Russian we still have 20 years of useful life.
For the remaining two vessels the job there has an option to charter the vessels at the same time and the option.
Exercisable by mid October 2022.
The new building Vlccs acquired in 2020 delivering into our fleet in July 2022 was fixed on a two year bareboat charter to an investment grade rated Japanese oil majors at a floating rate with a floor of 22005.
$172 per day, and a ceiling of $209700 net per day.
And then Mem P&L is healthy and our balance sheet remained strong as of March 31, 2022, we have about $108 million in cash.
The size of our balance sheet cash has a number of course duration, including new vessel capital commitment and related working capital.
Consequently, I would expect that we will hold considerably more.
Our current cash balance considering only our working capital of our own fleet size, we estimate an approximate cash balance that will be around 2 million per vessel.
Leverage is 28, 5% LTV as of March 31st 2022, and have a target debt maturity profile.
Mmm has a $2 8 billion in contracted revenue for the remaining nine months of 2020 to our contracted revenue already exist forecasted expenses by almost $70 million. Moreover out of our 35500 available days Automd.
16000 of the days are exposed to market rates, allowing for significant potential cash flow generation.
At this point I would like to turn the call over to Mr. Stratos newspapers.
CFO , who will walk you through the next few slides stratos.
Thank you Jim good morning.
<unk> is differentiated by its industry, leading scale and diversified exposure and opportunity for continued growth.
Slide nine details are still operating free cash flow potential for the remaining nine months of 2010 to do.
We have contracted 55, 4% or about 55500 available days are deliberately with grid the $8697 per day.
Our contracted revenue exceeds total cash expenses by almost shedding division.
15829 days with marketing with market exposure, but we will provide additional liquidity cash.
The majority of our market exposure comes from our model.
We're approximately 76% over available days are open or convertible index linked charters.
In Slide 10, you can see our fleet profile.
We are engaged in a process, which is a constant balancing airports.
To be proactive and capture cyclical opportunities squarely allocate the capital.
As you can see at the bottom of the slide we have clinical vessels with older strategical rates, while at the same time, we have two new building vessels to be delivered from the third quarter of 2022 through the first quarter of 2025.
Moving to slide 11.
We continue to ship through long term employment growth Pete.
As I mentioned, we recently entered into.
<unk> tanker segment.
Cool.
We sold two of these vessels commencing in 2010 to 20.
$28676 a month.
This will generate approximately $93 million of contracted revenue.
First of all the chartering activity, which added, albeit new building vlccs delivering in July 'twenty, principally on the debit basis for a period of approximately two years with the floating rate based on index with a floor of two to 2000 take some volatility too bullish initially $29700 per day.
Operating expenses of approximately $10000 per day, the vessels, we limit Laura.
<unk> hundred $72 and a ceiling of $59007 net per day.
The time charter equivalent basis.
We kept it out one portfolio to 150 Teu containership for approximately five three years at an average net rate of $40743 per day generating approximately $7 6 million of complex.
Following these recent features our contracted revenue amongst typically hit video.
79% of our contracted revenue comes from our container ships with charters extending through 2030 with a diverse group of quality Counterparties.
Our own 40% of this contract to delivery will be through the end of 2023.
I'll now pass the call later to Iran mothers public CFO , who will take you through the financial highlights.
Thank you Stratos and good morning, all I will briefly review our unaudited financial results for the first quarter ended March 31st 2022.
1022, our financial information is included in the press release and summarized in the slide presentation available on the company's website.
I would like to highlight that 2022 results are not comparable to 2021 as in.
2021, Mmm gradually merged with Navios containers at Navios partners increasingly available days by 164% to 11428 compared to 4252 for the same quarter last year.
Moving to the earnings highlights on slide 12.
Revenue for the first quarter of 2022.
Increased by $171 5 million.
263% to $236 6 million.
Compared to $65 1 million for the same periods in 2021 day increase in revenue was a result of the expansion of our available days and the increase in time charter equivalent rate.
<unk> increased by 37, 4% to 20396 pending compared to $14836 a day for the same period in 2021.
The average TCE achieved by sector was dry bulk 19848 container 27214 per day and tankers 15345 per day.
For the same period ended March 31st 2021, EBITDA was affected by $124 9 million of one off noncash items.
EBITDA for Q1 2020 to increase by approximately $92 4 million to $126 1 million compared to $33 7 million of adjusted EBITDA for the same period in 2021.
The increase in EBITDA was primarily due to an increase in revenue partially mitigated by $50 2 million increase in vessel operating expenses.
$14 6 million increase in time charter and voyage expenses and $9 million increase in Vienna, and in administrative expenses and $4 9 million increase in direct vessel expenses, excluding amortization of deferred Drydock Special survey cost and other capitalized items and a <unk> 9 million increase.
In other expense net.
The increase in expenses is mainly a result of the expansion of our fleet.
Net income for the three months period ended March 31, 2022 amounted to $85 7 million as compared to $11 8 million adjusted net income for the same period last year.
The increase in net income was primarily due to $92 4 million increase in adjusted EBITDA and a $21 8 million increase in amortization of favorable lease terms there.
Therefore, the increase was partially mitigated by a $29 8 million increase in depreciation and amortization expense and $7 4 million increase in interest expense and finance cost net and <unk> 3 million increase in amortization of deferred Drydock Special survey cost and other capitalized items.
Turning to slide 13, I will briefly discuss some key balance sheet data as of March 31st 2022, cash and cash equivalents were $190 million.
Our position has been mainly affected by the following items $126 1 million EBITDA $82 7 million working capital movement in accordance with the management agreement mainly relating to our tanker fleet.
$19 million payment for our new building vessels $54 $5 million net payments on our loan facilities and interest payments.
$12 1 million payments for dry docks in that business for <unk> and $12 1 million payment related to claims to be settled by insurances and future periods.
Long term borrowings, including the current portion net of deferred fees amounted to $1 32 billion net debt to book capitalization was at a comparable level of 38%.
Slide 14 highlights our balance sheet strength, our debt is four times covered by the value of our fleet based on Pos.
Patients we have already arranged the financing for the 2022 maturities.
While our remaining maturity profile this target with no significant volumes in any single year.
Approximately 30% of our debt, including operating lease liabilities have fixed interest rate, providing natural hedging against therefore seen rate increases.
The strength of our balance sheet is also reflected in our latest financing activities will continue to lower margins in our new debt facilities in March 2022 we signed a $55 million facility a software plus 225%.
<unk> will have agreed to enter in a new facility of $25 2 million at offer plus good adjustments spread plus two 5% refinancing existing facilities with an average margin of three 3%.
We have also received all first one on the financing of our new building program at even lower margin levels.
Turning to slide 15, you can see our ESG initiatives, we aspire to have zero emissions by 2050, and this process will have been pioneering and are adopting center and environmental regulations up to two years in advance aiming to be one of the first fleets to achieve full compliance.
<unk> is a socially conscious group, whose core violation to diversity inclusion and safety.
We have a very strong corporate governance, and a clear and clear code of ethics. Our board is composed by majority of independent directors and independent committees that oversee our management and operation.
Slide 16 details our company highlights Navios partners is a leading U S publicly listed company.
That application strategy creates resiliency and enables us to mitigate individuals segment volatility and diversification scale and financial strength should make NMM and attractive investment platform as we take advantage of global patents.
I'll now pass the call to George I've noticed executive Vice President of Navios Partners George.
Thank you Eric Please turn to slide 18 for a review of the dry bulk industry.
Despite the disruption caused by the war in Ukraine. The PDI achieved the highest Q1 average since 2010.
This was driven mostly by the strength of this upgrade sectors. In fact, the supermac sector posted the highest Q1 average since such estimates began in 2017 on the back of strong minor bulk demand.
An overflow of container cargos.
I will trade in 2022 is projected to increase by 6%.
Similar to last year most of the increase is expected to happen in the second half of the year with an additional boost in ton miles.
Ukrainian grain exports are expected to be significantly reduced.
And grain and coal exports get redirected away from Europe .
New longer trade routes emerge on the back of stronger worldwide coal demand as the world seeks to cope with extraordinarily high natural gas prices.
Turning to slide 19 demand for major and minor bulk cargos remains in growth mode, Despite China, Lockdowns and the invasion of Ukraine specifically.
Specifically seaborne iron ore trade is expected to increase by 10, 2% in the second half of 2012 with normal seasonality project in Brazil, and Australia, increasing exports as China plans further infrastructure investments to maintain 2022 target of GDP growth of five 5%.
Hi, guys in oil prices and the Ukraine rationale classes should support increased coal imports the gas price search has driven power plants to switch back to coal fired power generation helped me in 2022 <unk>.
At an expected rate of 4%.
Seaborne coal export imports for the second half of 2022 we'll follow the same seasonal pattern as iron ore coal demand is expected to grow by seven 8% in the state.
Half of 2012.
On the grain side, the global grain trade continues to be supported by an ever increasing world population.
<unk> protein demand worldwide and heightened food security issues initially driven by the pandemic and now buy award encroaching on there, we didnt quantities of eastern Europe .
Although global seaborne grain trade is expected to decrease in 2022 by one 4% due to the Ukraine crisis, New trading patterns will result in Panama decrease of only 4%.
Please turn to slide 20.
The current order book stands at six 6% of the fleet one of the lowest on record.
Net fleet growth for 2002 as expected at two 2% and only 4% in 'twenty three.
Owners, the move tonnage that will be an economic as the IMO 2023, Seo tools come into force.
Vessels over 20 years of age are about eight 3% of the total fleet, which compares favorably with the historically low order book.
In concluding our dry bulk sector view, continuing positive demand for natural resources water and sanction related longer haul trades for coal and grain.
Bind with Covid related fleet inefficiencies in there.
Slowing pace of new building deliveries on support TLLP freight rates.
Please turn to slide 22, focusing on the container industry.
Demand for goods or services in the U S and Europe continued to be firm supporting container trade.
Recently rates have moderated however, the rates are over five times 10 year averages in long term rates are at or near record levels, allowing owners floating long term contracts.
With our levels.
As you can see in the box on the lower right increases in demand for goods poor congestion and the restocking should further support containership demand with expected growth of 3% and 22.
Turning to slide 23.
Net fleet growth is expected of our Threep.
5% for 2002.
Most of the demand growth forecast it should be noted that about 66% of the order book is 413000 teu vessels or larger.
In addition, 10, 2% of the fleet is currently 20 years of age or older.
In conclusion, the container trade remains robust in spite of recent geopolitical and macroeconomic headwinds supply and demand fundamentals remained balanced due to continuing demand for consumables stock building and supply chain bottlenecks.
Along with continued fleet, an important efficiencies should continue to support the container shipping industry in China too.
Please turn now to slide 25 for a review of the tanker industry.
In spite of the Ukraine, Russia crises, the IEA steel projects and approximately 2% increase in worldwide demand for 'twenty two.
The expectation is that by Q4 or in demand will exceed pre pandemic levels.
Refining margins have increased substantially and strong demand for <unk> products continue to expand.
The summer travel season.
The IEA projects, a 17, 3% increase in jet fuel demand and trying to.
Both crude and clean products should benefit from boosting ton miles.
Russian oil exports ARINC.
Directed to new longer trade routes on the back of a phased in European button on a rash on exports.
Turning to slide 26.
<unk> net fleet growth is projected at only two 9% for 'twenty, two and only one 5% for 2013.
This decline can be partially attributed attributable to owners of cancer that shorter expensive long live assets in light of macroeconomic uncertainty and engine technology concerns due to upcoming show tourist predictions.
The current order book is only six 2% of the fleet.
<unk> over 20 years of age at 10, 7% of the total fleet, which compares favorably with a low order book.
Finally, turning to slide 27.
Product tanker net fleet growth.
Is projected at only one 1% for 'twenty, two and only 1% for 2003.
Current product tanker order book is four 9% of the fleet one of the lowest on record and compares favorably with the seven 3% of the fleet, which is 20 years of age or older.
We believe that the overall tanker order book and fleet are well balanced as the IMO 2023, and ballast water management regulations will lead to some vessel retirements in the coming months.
In concluding product. Thank you rates began to pick up in recent weeks.
And they are currently at healthy levels, leading the way for the crude tanker recovery.
The combination of global oil demand to return to pre pandemic levels, Opex, plus increasing production new longer trading routes.
For both crude and products as well as the lowest order book in three decades should provide for shelter tanker earnings going forward.
And this concludes my presentation I would now like to turn the call over to <unk> for their final comments angeliki.
Thank you George.
So I'm gonna presentation, and we open the call for questions.
At this time, if you would like to ask a question. Please press star and one on your Touchtone phone you may remove yourself from the queue by pressing the pound key.
And we'll go first to Chris Robertson with Jefferies.
Hello, Good morning, and thanks for taking my questions.
Good morning.
So the containership and dry bulk markets remained firm tanker rates are on the rise in NMM has $2 8 billion in contracted revenue.
And yet at <unk>. The distribution was just one 8% of quarterly EPS.
With units trading well below NAV, how are you thinking about returning capital to unit holders at this point.
Thank you for the question.
The fundamental question of what we're doing.
Right.
What we are doing is basically.
We are allocating you have seen that we have.
We have been ready.
Named <unk>.
No.
We actually.
Yeah.
And the new shaft going down somewhat.
Well just the opportunity when other companies out there in the same token loved it.
That and the doctors, who are able to go to a diversified line of Jake.
Sure.
Maybe for genetically and very conservative in the sector, where you can give us.
And that goes on.
That said.
To our shareholders.
Providing them so we have a low LTV.
No.
For 2018.
Moving on to me.
<unk>.
Yeah.
Thanks, Ed.
In that sense, we are able.
April .
They play.
We have seen that we have started doing a building that we have.
24 vessels of that is increasing in 'twenty. So this is basically an ongoing process.
Cool.
I look at Opportunistically.
At the end.
Because they are diversified so we don't have.
Uh huh.
David.
Reallocated.
Yeah.
Yeah.
Miami.
Yes.
And we are doing that.
We have been doing it across the board.
Segment.
Sorry.
Investors.
Just in terms of the new building program I guess is that do you think thats come to completion at this point because a substantial amount of your fleet will be replaced in coming years as those deliver so how are you thinking about I guess, an ongoing basis are you going to be more in cash harvesting mode now.
It kind of firing on all three cylinders and that could potentially be used for more.
Capital return to the unit holder or do you think theres more growth from here in terms of the fleet.
Actually if you will.
Have to ship between.
Hey.
I think that you have to monitor.
You'll have the new building program, which we will have to.
Sorry.
No.
Any disease, which is very very important because we have seen that.
Let's not forget we are.
Okay.
Background.
Got it.
In Ukraine.
Great.
Basically if you look public policy in China, yes than.
And then use the same thing.
Because of.
Government.
And in California.
Do you see that immediately.
On the longer debt.
So we need to be prudent on because.
Hey, Matt.
<unk>.
Crossroads.
So.
Got it.
Priority <unk>.
And low leverage.
Yeah.
We have lost.
And.
Okay.
Gotcha Alright, thank you very much for the time.
Thank you.
We'll go next to Rick Barnhart with Fearnley Securities.
Good afternoon.
Eric.
So George go ahead.
Another great.
Quarter.
I have a question.
Earlier I touched upon.
On page 10.
We're balancing the aging vessels with with new buildings.
How do you.
Can you comment on the growth.
You bet.
But.
My question is what do you CFO .
The ideal or optimal fleet size is about 150 vessels.
Yeah.
And that's what you should expect going forward as well or do you look for growth.
Okay.
I think this is.
Good question.
This is.
Sure.
It's about.
<unk> value, creating in ANZ and creating.
Yeah.
Additionally volumes higher.
So you talked about it.
<unk>.
A number of factors, but mostly about.
Okay.
You create the most value for it.
They call it.
As we show on the deals that we recently.
And then in the ophthalmic.
And opportunity.
The companies, who may not have been.
You may not have that.
That's the one that we were able to step in.
Entering the new shape.
Got it.
There is flexibility.
And also very opportunistic.
Well we are actually.
With a five year contract with DNA.
$30 million of EBITDA.
We have a 10%.
Then you've got <unk>, Israel funding risk after five years.
Can you answer that Scott.
So about 30%.
So this is an attractive entry point.
Yes.
I think all of that and that is the guidance.
It's really about creating volume.
Okay.
Okay. Thank you.
So looking at that.
The cash flow it looks like about $5 million million dollar strictly from from about $126 million of EBITDA for the quarter.
I appreciate there are some some some working capital movements. There can you provide some color or elaborate on those models.
No I think as we mentioned lane with great.
<unk>.
Cleared the working capital required under the management agreement.
You can do that bankruptcy and we also had some advances for the annual meeting.
So the puzzle.
That's our aspiration.
Okay. Thank you and I know it does move it's expected to be reversed over the next quarter or.
Okay.
What should we expect for for movement for next quarter.
No.
Management fees would be in line with what we have in our management agreement there are no backlog.
Question.
Okay. Thank you.
My questions.
Thanks, a lot.
And that concludes our Q&A session I will now turn it back to Andrew Mcgee for any closing remarks.
Thank you.
Yes.
Yes.
Thank you.
And this does conclude today's program. We appreciate your participation and you may now disconnect.
[music].