Q4 2022 Navios Maritime Partners LP Earnings Call
Thank you for joining us for Navios Maritime partners fourth quarter 2022 earnings conference call with US today from the company are chairwoman.
Yeah.
Chief Operating officer, Mr. Charles <unk>, Chief Financial Officer, Mr. Eric <unk>.
And Vice Chairman Mr. Sean.
Mind you This conference call is being webcast.
The webcast. Please go to the investors section of Navios website at Www, Navios MLP Dot com, you'll see the webcasting link in the middle of the page and a copy.
Copies of presentation.
Todays earnings conference call will also be found there.
Now I'll review the Safe Harbor statement. This conference call contains 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.
Forward looking statements are based upon the current beliefs and expectations of Navios partners management.
And subject to risks.
And uncertainty.
Cause actual results to differ materially from the forward looking statements.
Such risks are more fleet in August partners' filings with Securities and Exchange Commission. The information set forth herein should be understood in light of such right now.
Partners.
Any obligation to update the information contained in this conference call.
The agenda for todays call is as follows first.
Offer opening remarks.
Next Mr. <unk> will give an overview of Navios partners' segment data.
Next Mr. O'neil will give an overview of Navios partners financial results.
Thank you Mr. Chairman will provide an overview.
Lastly, we will open the call to your questions.
Now I'd like to turn the call over to Navios partners chairwoman and CEO Mrs. Angeliki <unk> Angeliki.
Good morning to all of you joining us on today's call I am pleased with our enhanced with a year.
2022.
For the full year, we reported revenue of $1 2 billion.
And then uhm.
$579 2 million.
For the fourth quarter reported revenue.
<unk> hundred $79 million and net income of $118 3 million.
We are also pleased to report net income.
June was the 18th.
For the full year.
Partners. This is bill.
<unk>, obviously taken company diversified.
<unk> asset classes.
City sectors with an average.
Of about nine five years.
Navios partners ended 2023.
Over the last couple of years, and then FY 'twenty.
One we need.
Container and.
<unk> segment today, we have 176 vessel speeds.
Due to these sectors based on a charter adjusted basis.
In addition to achieving diversification, we have been actively managing our portfolio to maintain a <unk> multiple.
So logically advanced fleet as we believe the newest technologies at a competitive advantage when compare to their own businesses.
Our business model allow us to take advantage of opportunities when the segment.
So thats when we acquired <unk> in 2021.
No.
Assets with modest Alba and the Gulf of Markwest assets can be offset by attractive long term credit was as Tom said as we recently disclosed data scientists.
I mean, this is market by market events and uncertainty Dominique all forecast.
Patients with several banks.
Trading positive are changing because of the Ukrainian conflict.
Contemplate the bumpy.
Global trade has adapted to these conditions.
By increasing the mine.
Anti commodities.
We remain vigilant.
We are also focused.
Can leverage today is in reach.
After the deal.
CVP and rationalizing our acquired fleet.
All this is in a brand new vessels.
Net HPV.
45% measure at the end of the fourth quarter 2022.
All right.
<unk>.
We reduced leverage so that net.
It falls within the range of between 20 and 25%. We believe that this level is an appropriate range for their suicides and while allowing us to expand our market opportunities.
Also in the guidance there is market this is carbon nationally.
Alex This is Scott.
Yes.
Please turn to slide seven.
You can see we have.
Excellent generating net income of almost 6000 million.
A significant amount.
Net cash flow was used.
Different number one basis is really the replacement program.
Awesome.
Amortization of our debt.
We also have been busy in the fourth floor.
We contracted 328 $3 million.
Boston properties.
We also sold 11 patients.
$213 5 million.
$134 still some day.
We didn't download this on slide eight as you can see about half of our approximately 57000 available days open.
The market is exploding with.
Presenting data of the available and open days by aggressive guide is there any sense out of the time.
The open days about 7% to 7% dry bulk and 17%.
Our tanker days.
The balance being okay.
Hope to generate substantial cash flow in 2023, given this low breakeven.
Now I'll turn the presentation over to scrap of Vascepa as Navios partners Chief operating officer.
Hey, good morning.
Thanks, Mike.
These are the basic.
Richard.
We benefit from Covid.
Which creates opportunity for us.
And well performing segments and drivers.
Okay.
We believe a diversified tenant base.
Okay.
Thank you.
It's Phil.
The asset model.
Sure.
Container ships.
Good.
But the book by 8%.
When you think of this advice introduced by Covid.
Sure.
The nickname for fleet value is a decrease of approximately 7%.
We conducted languishes baidu continues to be popular.
Because I think we would.
Miscalculate southern markets.
We took a hit.
Yes.
Most of the segments will allow us to optimize the topic.
The segment was affected.
The computer market.
Obviously, we can debate.
Okay.
Containership.
Hi.
Accordingly, we pay for container stood a little bit.
And importantly, this particular borrower.
Okay.
Fixed.
Great.
This reduced market related revenues.
Great.
Thank you.
But we haven't seen the big one in Korea.
Thank you.
Okay Thats helpful.
Yes.
It speaks let me, let me take a base level of 70%.
Please.
We expect the tanker fleet with limited storm events.
Lastly, our variable Jamie a little below the historical levels.
Basically individual deposits, while we do some months it would be helpful.
As a result of both good questions of our available days are fixed.
Good evening.
The slide 10, you can see we are.
Always remains.
So that we maintain the genco.
Michael.
Movies, and more cloud whether it be ambitious.
Publicly.
How big of an investment and good evening.
Versus what will be delivered into our fleet.
And container ships, we are acquiring one quarter totaled $8 6 million.
Brittany buy into it.
Got it.
Zane anything about $1 1 billion and conduct given what about Houston.
Okay.
As the tanker space, we entered remarks grew up in the future.
The other divisions versus what was accomplished.
Click on the video.
These visits have been truckload pricing.
Literally 26, some of the digital should be generating revenues of approximately 290 per year.
Hi.
This is all about.
Finally on the day, but let.
With me.
Please visit.
Both are being delivered through June .
These vessels will be something.
With an average duration of about five years of deliberate April PRASM growth.
We have also been very active in the S&P market.
Therefore, the total delivered basis with an average age of our petrochemical GTS.
We sold seven divisions.
With the pending acquisition.
Taking advantage of a strong market.
The increase in demand for shipping.
Yes.
We thought we should incorporate.
Okay.
Further we proposed the optional hotline.
Robert Please.
Please.
Political is price.
This vessel was previously part of our budgeting.
Moving to slide 11, we continue to see good things maybe for Pete.
So again as you mentioned earlier in Q4, which are created.
Sure.
A portion of this Republic.
Sure.
With contracts for our budget.
<unk> got some recovery in the market.
Or should we have rebuilt the capesize vessels.
Although its duration.
You talked a little bit of both on the clinical data.
Operating income.
Yes.
Our total contract value amongst others.
Six of our profitability comes from local businesses.
Between 2000 to <unk>.
Hey, David.
But.
Almost 50% in this quarter.
We'll begin with initiatives for the year.
No cost default related to ownership, which will take you through it.
Hey.
Thank you Carlos and good morning, all.
I'll briefly review, our unaudited financial results for the fourth quarter.
As of December 31st 2022.
The financial information is included in the price of lithium and summarized in the slide presentation are available on the company's website.
I would like to highlight that 2020 to rebound somewhat comparable to 2021.
2022, and then significantly expanded its fleet through acquisition.
And welcome to the earnings highlights on slide one.
Total revenue for the fourth quarter operating 22 increased by $38 $10 million to $379 million.
Compared to $268 1 million for the same period in 2021 banks.
Time charter revenue for the period is understated by $18 1 million in the call.
Okay.
One the recognition of revenue on a straight line basis, whereas some of our thought they'd have to escalate.
Our days increased by 27% and 14409 compared to 11 three.
363 for the same quarter last year, and our average time charter equivalent Anthony.
Increased by 4% to 23840 per day compared to 33500 day on the same day is implanted 91.
In terms of sector performance, both badges and container turns improved by eight.
For our bankers to third.
<unk> thousand 800, <unk> before and container rates increased by 43% to 34057.
In contrast of dry bulk.
46% lower to 15.
<unk> hundred 76.
EBITDA for the fourth quarter 2022 increased by 35% to $206 2 million compared to $152 4 million for the same period last year.
Net income for 2022 slightly improved compared to 2021, <unk> hundred 18 confidently.
And so you wanted to put $884.
For the full year 2022 increased by 70% to one one to one.
Compared to $713 2 million for the same periods in 2021.
2022 revenue is understated by $48 2 million because of the GAAP adjustment required charters with dose escalating.
Our available days increased by 66% and 49800 far compared to 31884 for 2021.
The average TCE rates increased by 6%.
23042 per day compared to 21709 per day for 2021.
In terms of sector performance TCE rates increased by 40% container to 51358.
In fact, <unk>, 7% for tanker for 'twenty, one 'twenty dry bulk rates were 17% lower compared to 2000.
21464.
EBITDA for 2022 increased by 41% to $817 3 million compared to $578 5 million for the same period last year.
Excluding one off items adjusted EBITDA increased by 57% to 660.
Six to $7 9 million.
Net income for 2022 increased by 12% to $579 2 million compared to $516 2 million for the same period last year.
And if the unit weighting.
Excluding one off items adjusted net income increased by 18% to $429 9 million.
Adjusted net earnings.
Thanks.
Turning to slide 13, I will briefly discuss some key balance sheet further.
As of December 31st 2022 cost and cash equivalents were $175 1 million in 2000.
'twenty, two we paid $176 8 million pre delivery installment and other capitalized expenses.
The improvement program. We also paid $412 million was 37 705, new building vessels.
Finally, we have seven vessels for $284 5 million net adding 231 million cash asset.
One of their respective dates.
During the period, we have 240 million scheduled debt repayments under our credit facility.
Long term borrowings, including the current portion net of deferred fees amounted to $1 9 billion.
Net debt to book capitalization stood at 41, 3%.
Slide 14 highlights our debt profile.
Our Japanese business has two times covered by the value of our fleet based on publicly available valuations will continue to diversify our funding sources between banks and leasing structures. Our maturity profile is target is not significant.
Q.
Here.
Slide 15 summarizes our recent balance sheet initiatives, we have tried to mitigate some of veins pleased in freight cost by using our average margin to two 7% a reduction of 13% compared to 2021.
In addition, 70% of our debt, including operating lease liabilities of $15 eight at an average rate of five 7%, providing a natural hedge against guidance increases.
Finally, the average margin of our new Brisbane facility is 184%.
In terms of our new building program approximately 75% of arguably even debt requirements are already concluded orange regimen based on sites, we have huge opportunities to expand our financing sources, adding new banks in this half.
<unk> also concluded our first export credit agency.
Finally, we have announced $149 million of new financing for existing vessels and new acquisitions.
Turning to slide 16, you can see our ESG initiatives, we have five zero emission by 2050 and this process would have been by remaining in a market environment.
And the aim is to be one of the first to achieve full compliance.
And obviously they are socially cautious growth was all valuations with divesting doosan and safety.
We have very strong corporate governance.
Our board is composed by a bunch of independent directors.
And the committees.
The management and operations.
Slide 17 these days our company highlights.
Partners are using U S publicly listed company.
Diversification strategy creates resiliency in our 9% to mitigate individual segment policies.
Our financial strength scale and diversification should make an amendment attractive investment platform and we take advantage of global trade.
I'll now pass the call to Tom will take you through the industry section.
Thank you Arie, Please turn to slide 20 for the review of the tanker industry. Mr. Rising sharply in Q3 tanker rates continued to strengthen through mid November before softening slightly ended back from cooling Chinese economy, a mild winter in the northern hemisphere, and the absence of U S crude exports.
At the end of January rates for both crude and product tankers have risen significantly on the basis of China reopening and longer ton miles all Russian crude and products.
Despite the economic uncertainties in Ukraine crisis.
A projected 2% increase in world oil demand for 2023 to $101 9 million barrels per day exceeding 2019 pre pandemic levels.
China in particular account for 45% of global oil demand growth in 2023, rising 9 million barrels per day or 6% over 22.
Turning to slide 21 tanker rates across the board have risen to the improving supply and demand fundamentals combined with the invasion of Ukraine, which has shifted Russian crude and product exports to longer Ralph how to India and China. Additionally, European refineries are replacing Russian crude and products with supply from the U S, Brazil, and the middle East further incur.
Leasing ton miles as trade efficiencies incremental support for rates came into effect as the new EU sanctions and price caps began on December 5th product trades February 5th.
Product tanker should also be aided by discounted Russian crude exports to the far east returning to mid Atlantic as clean product.
Upward pressure on already strong rates two.
<unk> 2023 crude and product ton mile growth is expected to increase by six 4%.
11, 2% respectively.
Turning to slide 22.
VLCC net fleet growth is projected at two 1% for 2023 and negative fleet growth of minus one 5% for 2024. This decline can be partially attributed to owners hesitant to order expensive long lived assets in light of macroeconomic uncertainty and engine technology concerns due to restrictions.
And for since the beginning of this year.
The current record low order book is only 2% of the fleet were only 18 vessels. The lowest 30 years 16, Vlccs will deliver during the balance of 2023, non 24 and one each in 2025 and 2026.
Over 20 years of age or 14% of the total fleet of 127 vessels, which is over seven times.
Turning to slide 23 at a tanker net fleet growth is projected at one 8% between three and <unk>, 4% for 2024.
Our current product tanker order book is five 4% fleet or 137 vessels quarter lowest coverages.
Favourably with the 10, 1% of the fleet.
363 vessels, which are 20 years of age or older and concluding the tanker sector review tanker rates across the board continue at strong levels. The combination of below average global inventories oil demand returning to pre pandemic levels, we've longer trading routes for both crude and products as well as the lowest order book the three decades.
<unk> 2020 regulations should provide for healthy tanker earnings going forward.
Please turn to slide 25 for the review of the Drybulk industry the PDI attained.
2022 high of 3369 by mid May and then the Lockdown Chinese economy, the worthy Ukranian bank in the U S dollar combined to weaken world Drybulk trade. The 'twenty two BD average of 1934 with some 1000 points below the previous year. However, it should be noted that 2022.
The second highest index since 2010.
With regard to the Q4, the average of 15 23 with the fifth year in a row that Q4 was lower than Q3 and the first time as of Q4 was the lowest quarter of the year in 2008.
Overall, the Chinese reversal.
So COVID-19 policy and additional physical sales combined with the weakening U S dollar point to recovery in the dry bulk market as indicated by the highest future market for all asset classes overall Drybulk trade in 2023 is projected to increase by two 3%.
Going forward long term supply and demand fundamentals remain intact, China is reopening the economy. The historically low order book both in U S dollar.
And tightening ghd emissions regulations remain positive factors.
Please turn to slide 26.
With regards to iron ore, China zero, Covid policy and real estate concerns significantly impacted steel production and R&R demand as we need to both Chinese seaborne imports of steel production fell 2% in 2022, however, trying to use a removal of the zero Covid policy and fiscal stimulus focused on supporting the real estate sector should boost iron ore demand over.
Global Iron ore trade is expected to increase by 0.8% in 2023. Additionally, iron ore trade is expected to increase by nine 2% in the second half of 'twenty three over the first half of this year.
You'll recall, the Ukraine crisis continue to impact global imports as European supply concerns persist.
This is led European countries to reactivate coal fired power plants European seaborne coal imports increased by 20% in 'twenty two.
To increase by a further 7% in 2023.
The surrender EU ban on Russian coal will lead to shifting trading patterns towards longer haul routes.
Overall 2023, seaborne coal trade growth is expected to be supported by the estimate for 2% growth in tonnage.
Additionally, coal trade is expected to increase by two 7% in the second half of 'twenty three over the first half of 2023.
On the grain side 22, great seaborne trade.
<unk> volume was negatively impacted by the war in Ukraine, reducing black sea exports, but this was partially mitigated by trade adjustments with longer haul routes increasing ton miles.
Global grain trade continues to be driven by heightened food security issues, driven initially by the pandemic COVID-19.
<unk> volume in ton mile growth are expected to increase by three.
And five 3% respectively in 2023.
Turning to slide 20.
Kevin.
The current order book stands at 17% of the fleet were the lowest since the early 19 net.
Net fleet growth for 2023 is expected at one eight.
0.3% in 2024 orders removed tonnage that will be an economic due to the IMO 'twenty three.
Rules enforced since the beginning of this year.
This is over 20 years of age are about 90% of the total fleet, which compares favorably with the historically low order book.
Recruiting of Drybulk sector, a year continuing demand for natural resources, China is reopening.
Thanks related longer haul trades to model, a slowing pace of new building deliveries.
Freight rates going forward.
Please turn to slide 29.
Focusing on the container industry after filtering in Q2, the Shanghai container freight index correction accelerated in the second half of 'twenty two.
Back of uncertain macroeconomic conditions combined with slower consumer demand for goods, which led to a decrease in container trade. These important initiatives and then rapidly decreasing vessel charter rates.
Toward year end and continuing into 2023 of the fall in rates is moderate and today's rates remain above historical pre COVID-19 averages.
As you'll note in the graph on the lower right. The U S E channel inventory to sales ratio of the recent low but still well below long term average.
The graph on the lower left shows moderating purchases of goods, which has slowed import to eating pork takeaway bottlenecks and port congestion.
U S imports.
Not been helped by Euro Covid policy, which had slowed some exports.
Textbooks.
Overall 2023 container trade is projected to decrease.
In 2024.
Turning to slide 30, net fleet growth is expected to be six 7% for 2023, and five 5% to <unk> 20 for the current order book stands at 29, 5% at 11, 7% of the 320 years or older.
About 72% of the order book is for 10000 teu vessels or larger.
Concluding the container sector review.
Client demand fundamentals remain challenged due to economic and political uncertainties. The combination of China's recent reversal of a zero corporate policy and the IMF.
January upgrade to world GDP growth to two 9% in 'twenty, three and three 1% in 2024 provide a bright spot and a challenging 2033.
This concludes our presentation I'll now turn the call over to Andrew Vicki for final comments.
<unk>.
Thank you Dan.
Okay.
This concludes our formal presentation, we opened according to questions.
At this time, we will open the floor for questions if you'd like to ask a question. Please press the star key followed by the one key on your Touchtone phone.
Any time, you would like to remove yourself from the question queue. Please press star Q again to ask a question. Please press star one our first question comes from Omar Nikita from Jefferies.
Thank you Hey, guys good morning, and good afternoon.
Wanted to ask about clearly a lot is going on and you have a very dynamic approach to the fleet.
The overall portfolio I wanted to ask about the vessel sales you announced today, you've sold 11 ships, bringing in $214 million.
How much of that are you expecting to net after paying down debt.
Debt associated with those ships in and then how are you thinking about the use of that free cash that remains.
Good morning Omar.
Good question.
Okay.
Thanks, Brian .
Got it.
Right.
Yes.
Okay.
I mean basically.
No.
We've actually analyzed by.
By selling older less accretion.
And keeping in acquiring <unk>.
I also have a better.
Anthony.
This is it but I think.
We have seen it.
Long term debt and has provided us today of about an average age of $9.
Mike.
No.
Indirectly, which is four years, all inbound container and Duncan and about two years from Deutsche Bank.
Yes definitely.
<unk> mentioned you mentioned Angelica early on in the presentation about target leverage range can you just go over that again because.
I see the Ltvs that 49% and I think a year ago you had then.
Youre aiming for somewhere in maybe in the mid Thirty's could you just go over what you were saying earlier about what you'd like the net equity ratio to be.
Our net equity.
And we read about.
About 45, you should realize is in ABB.
Payments, we have already done.
So.
And now to a deleveraging that is happening as vessels coming to the Walton.
Youll have 300.
Approximately 600 million.
<unk>.
Capital repayment plans yet.
Naturally because the vessels coming into the wall.
So with that and the guns and in Asia, we see.
We see that this is.
Yeah.
Targeting on.
25%.
Because.
Got to generation.
Goodbye.
So big.
Big picture.
Thank you Andrew.
Well, we have done the last few years.
Three major acquisitions one in container.
One in tanker.
Acquisition, and we have seen anyone and warm and dry bulk.
Basically.
I believe that 2023.
Jamie.
Great.
Quite significant gas fields.
Thanks Angela.
Target net LTV.
Is 20% to 25%.
And just just double checking confirming struggles I think you had mentioned that the LR too.
Contracts, so that that sums it up now all six of those new buildings have been fully contracted for five years on average.
Yes exactly.
Those have been concluded.
So all six of them today that contracted for five years.
It didn't have an average grade of around <unk> 26, and how closely.
Okay, Great and then maybe just one final one just on sort of the.
The sales and the overall transactions you've done here it is.
Really been centered within dry bulk and within tankers.
And clearly it seems containers has been much more about just harvesting the backlog effectively how are you thinking about that fleet as it stands today.
Given we've seen the market correct.
There are some shifts that do come up open for renewal how are you thinking about the fleet that you have today in containers and whether you would become more active in either divesting or acquiring ships.
I mean, if you will.
On the container segment basically.
We have singled that out as high teens Duane Thanks Amir.
The driving of our vessels will have meaningful day I mean, we have a 2000.
154 dollar stay.
Okay.
Breakeven to open day, and you can see on the page.
Eight.
Basically container base.
<unk> 1500.
Many months.
And we see that as being.
And level and level of about high teens.
And.
Approximately.
So this is where we add on the container apples you showed on the container segment, we have already.
I remember in 2020.
Ed.
Jonathan we have all of this vaccine.
And basically we made.
Yes.
Uh huh.
Earlier this week.
So we already have the backlog of the license we need to really do.
This is part of that.
And this is basically.
We have taken.
Hi, Richard.
And we do that.
This is Ed.
And we already have all the ones we wanted to do.
Got it thanks for that color.
Thanks for answering my questions I will turn it over.
Yeah.
Okay.
It appears we have no further questions at this time I will now turn the program back over to Anthony go for any additional or closing remarks.
Thank you. This concludes our presentation. Thank you very much.
Thank you ladies and gentlemen. This concludes today's conference you may now disconnect.
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Sure.
And then.
Okay.
Yes.
Okay.
Thanks.
Okay.
[music].