Q3 2024 Navios Maritime Partners LP Earnings Call
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Thank you for joining us for Navios, Maritime Partners
Speaker Change: 3rd quarter 2024, earnings conference call. With us today from the company, our Chairwoman and CEO, Miss Angeliki Frangou. Chief operating officer Mr. Statoz Desypris.
Speaker Change: Chief Financial Officer, Mrs. Erifili Tsironi, and Vice Chairman, Mr. Ted Petrone. As a reminder, this conference call is being webcast. To access the webcast, please go to the Investor section of Navis Partners website at www.navis.mlp.com. You'll see the webcasting link in the middle of the page and a copy of the presentation reference in today's earnings conference call will also be found there. Now I will review the safe harbor statement. This conference call could contain full-looking statements within the meaning of the private security litigation reform act of 1995 about Navis Partners.
For our looking statements are statements that are not historical facts.
Speaker Change: Such for looking statements are based upon the grim beliefs and expectations of Navius Partners Management and a subject to risks and uncertainties which could cause actual results to defirmate relief from the forward-looking statements.
Speaker Change: Such risks of fully discussed in Navis Pratenus filings with the securities and exchange commission.
Speaker Change: The information that was herein should be understood in light of such risks. Now this partners does not assume any obligation to update the information contained in this conference call.
Speaker Change: The agenda for today's call is as follows.
Speaker Change: First Miss Frangou will offer opening remarks. Next Miss De Disciptus will give an overview on Navis Partners segmentata
Speaker Change: Next, Mr. Roni will give an overview of Navis Partners Planashary's arts. Then Mr. Petrone will provide an industry overview. And lastly, we'll open the call to take questions.
Speaker Change: Now I turn the cold over to another Spartanist chairwoman in CEO, Miss Angeliki Frangou. Angeliki
Angeliki Frangou: Good morning and thank you all for joining us on today's tour. I am pleased with the results for the third quarter of 2024 and the nine maps period and it's September 30, 2024.
Speaker Change: For the quarter we reported revenue and a income of $340.8 million and $97.8 million respectively.
Speaker Change: For the first nine months we reported revenue in a income of $1 billion and $272.6 million respectively.
Speaker Change: Ernings per common unit worth $3.20 for the quarter and $8.87 for the first nine months.
Speaker Change: Dispartate in Master's been a good time for shipping. Or sectors have been performing well. More surprisingly, this performance has been in their face of slowing growth from China and an enemy European economy and two armed conflict.
Speaker Change: The Ukrainian conflict is in its 30 years and is evolving dangerously with a vision of North Korean troops to the battle space.
Speaker Change: The war in Israel is in its second year having expanded to Lebanon and now including the direct exchange of fire between Iran and Israel.
Speaker Change: Illite of this, I question whether we are becoming insensitive to increasing the rest of struggling, economies and expanding conflict zones. At Navios?
Speaker Change: We recently monitored this increasing risk and tried to calibrate our business activity accordingly.
Speaker Change: Please now turn to slide 6. Navier Spartans is a leading public-elected shipping company with a 179 vessels diversified in 16 asset classes in three sectors.
Speaker Change: We have 331.9 million of cars on our balance sheet.
Speaker Change: We continue on our glide path to our target net leverage range of 20-25%.
Speaker Change: As you can see, a metal TV as of the end of the SNL's quarter was 32.9% not meaningfully up from the last quarter.
Speaker Change: Please turn to slide 7. I would like to focus on how we are turning capital to our unit holders. And the Ardivitant Program will pay a 20 cents.
Speaker Change: The Evident Per Unit Anjory.
Speaker Change: In addition, we have a 100 million Juni repurchase program under this program here today. We repurchase 350,000 and 125 units. We used a 10.3 million to repurchase 1.2% of the original float.
Speaker Change: Including Tildens, we have returned a total of 22.9 million dollars to our unit holders. In addition, the repression of our unit was a creative, the analyst.
Speaker Change: average estimate of our unit in every is now around $148 per unit. In contrast, our unit repulse surprise average $52.1.
Speaker Change: By purchasing units, where below Analyst estimate an AV, we capture a 33.7 million discount. This represents a creation of a dollar, point 11 cents to each remaining units holder.
Speaker Change: We have around 81.7 million of our ability and the unity purchase problem. They've all year and time, we offer the reproachies, we'll be subject to general market and business conditions, working capital requirements, and other investment opportunities among other factors.
Speaker Change: Pleistantus Light 8 where we provide you.
Speaker Change: and Asian P update for the third quarter and 2, 4, 2020, 4, quarter today sales, we generate a 25.9 million gross sales process from 2 dry bulk vessels with an average age of 19 years.
Speaker Change: For Acquisitions, we spent $212 million for two new buildings, methanol ready, and scrubbed with it, $7,930 T.U. Containerships. These containers were fixed for $40,000 to $40,000, $47, net per day for five years. In terms of deliveries, we took delivery of three previously announced new building vessels. Two or $5,3,000, you contain their ships.
Speaker Change: Fixed at an average rate of $37,282 net per day for 5.3 years and one was an Aframax LR2
Speaker Change: $847.4 million from 5 4250TU container ships, fixed at $34,915 net per day for 2.3 years. $80.6 million from 3 MR2 tankers, fixed for $24,544 net per day for 3 years. $134.5 million from 1 VLCC tanker, fixed at $44,438 net per day for 2.1 years. Our operating cash flow potential remains strong with the fourth quarter of 2024.
Speaker Change: We estimate 61.8 million x's of contracted revenue over total cash expense with 2,650 remaining opening index days.
Speaker Change: Please turn to slide 9, where we focus on how we are executing our strategy.
Speaker Change: We have achieved a 27% decrease in net LTV since year-end 2022.
Speaker Change: In terms of fleet renewal and modernization, we have purchased 46 new buildings since the first quarter of 2021, of which 19 vessels have been delivered. We have also sold 31 vessels.
Speaker Change: since the third quarter of 2022. We provide a view of the evolution of our fleet through selected metrics. As you can see, our fleet is only slightly larger than it was in year-end 2022. Our fleet age remains about the same.
Speaker Change: 9 billion contracted revenue
Speaker Change: With a stable and performing flip, our financial metrics are strong. Our adjusted EBITDA is up 5% over the first nine months of 2023 and 17.6% over the same period in 2022. Our cash balance is $332 million and current net leverage is 32.9%.
Speaker Change: a material improvement since the end of 2023
Speaker Change: and in a path to reach our target of NET-ELP-TV of 20-25 percent. We present at the bottom of the slide the average analyst estimates of the company's NAV for the period starting in June.
Speaker Change: Q4 2022 and Q3 2024
Speaker Change: Navios per unit NAV increased by $37 to $148, an increase of 33.3% over the 21-month period.
Speaker Change: I now turn the presentation over to Mr. Efstratios Desypris, Navirus Partners Chief Operating Officer. Efstratios?
Efstratios Desypris: Thank you, Angeliki, and good morning all. Please turn to slide 10, which details our operating free cash flow potential for Q4 of 2024.
Efstratios Desypris: We fixed 81% of available days at a net average rate of $26,052 per day.
Efstratios Desypris: Contracted revenue is expected to exceed total gas expense by $61.8 million and we have 2,650 remaining open or index linked days that should provide substantial additional gas flow.
Efstratios Desypris: So that you can perform your own sensitivity analysis, on the right side of the slide we provide our 13,741 available days by vessel type.
Efstratios Desypris: Please turn to slide 11 We are constantly renewing the fleet, so we maintain a young profile
Efstratios Desypris: We reduce our carbon footprint by modernizing our fleet, benefiting from newer technologies and eco-vessels with greener characteristics. In Q3, and so far in Q4, we took delivery of three vessels.
Speaker Change: to 5,300 T.U. container ships, all chartered out for an average period of 5.3 years at an average net daily rate of $37,282.
Speaker Change: 1 LR2 Aframax vessel which has been chartered out for 5 years at $25,576 net per day
Speaker Change: Following the deliveries, we have 27 additional new building vessels, delivering to our fleet through 2028, representing 1.9 billion of investment.
Speaker Change: In container ships, we have 8 vessels to be delivered with a total acquisition price of 0.8 billion. We have mitigated this risk with long-term credit-worthy charters expected to generate upon 0.8 billion in revenue over a 6.6 year average charter duration.
Speaker Change: In tankers we have 19 vessels to be delivered for a total price of approximately 1.1 billion. We charter out 15 of the vessels for an average period of 5 years, expected to generate aggregate contract driving of about 0.7 billion.
Speaker Change: We have also been opportunistically replacing older vessels.
Speaker Change: In 2024, we sold 9 vessels with an average age of 17.5 years for 183 million. At the same time, we exercised purchase options on 5 Chaterin Japanese-built vessels with an average age of 8 years for a total price of 142.1 million.
Speaker Change: Moving to slide 12, we continue to secure long-term employment. In Q3 and so far in Q4, we created about 420 million additional contracts in revenue.
Speaker Change: Approximately $305 million from our container ships and about $150 million from tankers. Our total contracted revenue amounts to $3.9 billion. $1.5 billion relates to our tanker fleet, $0.3 billion relates to our dry bulk fleet and $2.1 billion relates to our container ships.
Speaker Change: Charters are extending through 2037 with a diverse group of quality counterparties.
Speaker Change: Almost 50% of our contracted revenue is expected to be earned by the end of 2026.
Speaker Change: I now pass the call to Eri Tsironi of CFO, which will take you through the financial highlights. Eri?
Eri Tsironi: Thank you Efstratios and good morning all. I will briefly review our unaudited financial results for the third quarter and first nine months of 2024.
Speaker Change: The rate for our dry bulk fleet increased by 32% to 18,632 per day compared to the same period in 2023. In contrast, time charter rates for our containers and tankers were approximately 11% and 7% lower, respectively. Time charter equivalent rates for our containers stood at 30,710 per day and for our tankers at 25,788 per day for the third quarter of 2024. EBITDA, Net Income and EPU were adjusted as explained in the slide footnote. Excluding these amounts, adjusted EBITDA for the third quarter of 2024.
Speaker Change: The total revenue for the first nine months of 2024 increased by $22 million to $1 billion compared to the same period in 2023. The increase in revenue was mainly a result of a higher FTAE rate despite slightly lower available days. Our FTAE for the first nine months of 2024 was $22,830 per day.
Speaker Change: In terms of sector performance, time charter rate for our dry bulk fleet increased by 24% to 16,920 per day.
Speaker Change: compared to the same period in 2023. In contrast, time charter rates for our containers and tankers were approximately 13% and 6% lower respectively. For the first nine months of 2024, time charter equivalent rates for our containers stood at 30,275 per day and for our tankers 27,241 per day.
Speaker Change: Adjusted Debit Dough for the first 9 months of 2024 increased by $29,000,000 to $549,000,000 compared to the same period last year. Adjusted Net Income for the first 9 months of 2024 increased by $12,000,000 to $262,000,000 compared to the same period last year.
Speaker Change: Adjusted earnings per common unit for the first nine months of 2024 were $8.53.
Speaker Change: Turning to slide 14, I will briefly discuss some key balance sheet data. As of September 30th, 2024, cars and cars equivalents
Speaker Change: including restricted costs and time deposits in excess of three months were $332 million. During the first nine months of 2024, we paid $174 million under our new building program, Net of Debt. We concluded the sale of five vessels for $104 million, adding about $70 million cash after the repayment of debt.
Speaker Change: Long-term borrowings, including the current portion, net of deferred fees, increased by $221 million to $2.1 billion, mainly as a result of the delivery of eight new building vessels, for which their respective delivery installments were paid with debt.
Speaker Change: Net debt to book capitalization increased to 34.3%
Speaker Change: Slide 15 highlights our debt profile. We continue to diversify our funding resources between bank debt and leasing structures. 31% of our debt has fixed interest rates at an average rate of 5.5%.
Speaker Change: We also have mitigated part of the increased interest rate cost by reducing the average margin for the floating rate debt for the in-the-water fleet to 2%.
Speaker Change: I note that the average margin for the floating rate debt
Speaker Change: of our new building program is 1.65%.
Speaker Change: Our maturity profile is staggered, with no significant balloons due in any single year. In September 2024, Navios Partners entered two new credit facilities.
Speaker Change: The first is for up to 130 million to refinance the existing indebtedness of six vessels and finance part of the acquisition cost of one new building LR2 vessel.
Speaker Change: The transfer relating to the new building is priced at Terms Offer plus 150 basis points per annum and the remaining facility amount is priced at Terms Offer plus 175 BPS per annum.
Speaker Change: The second facility is up to 48 million to refinance the existing debtors.
Speaker Change: of three vessels and finance part of the acquisition costs of an Ultramax vessel. The facility bears interest of term SOFRA plus 175 basis points per annum or 70 basis points for any part of the loan secured by cash collateral.
Speaker Change: Turn to slide 16, you can see our ESG highlights. We continue to invest in new energy-efficient vessels and reduce emissions through energy-saving devices and efficient vessel operations.
Speaker Change: Navius is a socially conscious group whose core values include diversity, inclusion and safety. We have strong corporate governance and clear code of ethics, while our board is composed by majority independent directors. I now pass the call to Ted Petrone to take you through the industry section. Ted?
Ted Petrone: Thank you, Ari.
Ted Petrone: Please turn to slide 18 for a review of current trade disruptions.
Ted Petrone: The Red Sea entrance leading to the Suez Canal, a strategic maritime transit point, continues to operate at restricted transit levels.
Ted Petrone: Red Sea disruptions have caused a rerouting of ships via the Cape of Good Hope, increasing costs and ton miles. Since the first half of December 23, transits have reduced by 51% for containers, 55% for dry bunk vessels, and 50% for tankers. Panama Canal daily transits are essentially back to normal.
Ted Petrone: Please turn to slide 20 for a review of the tanker industry.
Ted Petrone: World GDP is expected to grow at 3.2% in 2024 and 2025 based on the IMF's October forecast.
Speaker Change: The IAEA projects a 0.9 million barrels per day increase in world oil demand for 2024 and a 1 million barrel per day increase in 2025.
Speaker Change: Chinese crude imports continue to disappoint, averaging $11.1 million a day through September, down 3% or about $0.3 million a day compared to the same period last year.
Speaker Change: After a strong first half, Q3 seasonality played out on the back of refinery maintenance during the shoulder season, combined with softening Chinese demand. However, current rates remain in line with long-term averages.
Speaker Change: Product tankers held up better than crude, even though swing tonnage, i.e. uncoated tankers taking CPP, was up over 60% for the same period last year. October saw increased crude movements, raising crude tanker rates. This should assist product tanker rates.
Speaker Change: The OPEC plus crude export cuts, which were scheduled to commence unwinding on December 1st this year, are currently planned to start January 1st, 2025, which, if implemented, should further assist crude tanker rates.
Speaker Change: Turn to the slide 21.
Speaker Change: Turn inside 22.
Speaker Change: Fleet growth is projected to be zero and possibly negative for VLCCs in 2024 and 2025 combined. This decline can be partially attributed to owners' hesitance to order expensive, long-lived assets in light of macroeconomic uncertainty and engine technology concerns due to CO2 restrictions enforced since the beginning of this year.
Speaker Change: The current low order book is only 8.3% of the fleet, or 75 vessels, one of the lowest in 30 years. Vessels over 20 years of age are about 20.1% of the fleet, or 184 vessels, which is over two times the order book.
Speaker Change: Turn to the slide 23.
Speaker Change: Projected product tanker net fleet growth is 1.7% for this year and 4.3% for 2025. The current product tanker order book is 21.3% of the fleet and compares favorably to the 19.3% of the fleet which is 20 years of age or older.
Speaker Change: In concluding the Tanker Sector Review, tanker rates across the board continue at historically healthy levels.
Speaker Change: The combination of moderate growth and global oil demand, new longer trading routes for both crude and product, as well as low to moderate order books, and the IMO 2023 regulations should provide for healthier tanker earnings going forward.
Speaker Change: Please turn to slide 25 for a review of the dry bulk industry. Q3 followed a similar pattern to the first half as robust Atlantic exports of iron ore coal and grain continued, resulting in the BDI averaging 871, slightly higher than the first half average of 1836, with an assist from a counter cyclically strong Q1.
Speaker Change: Q3 ended 2% higher than it started, with the BDI bouncing off a low in early August, as capes led the way, finishing with the highest quarterly average of the year, while Panamaxis and Tsupras softened slightly.
Speaker Change: As of yesterday, the BDI was 1374. After peaking at 2110 in September 27th, the anticyclical Q4 downturn has been led by CAPES, assisted by Panamaxes, which have underperformed Supras year to date.
Speaker Change: Dry bulk trade is expected to grow by 2.7% this year and 0.8% in 2025, enhanced by a 5.2% and 1.3% increase in ton miles, respectively.
Speaker Change: Most of the growth is anticipated to come from additional Atlantic exports of the above-mentioned cargos plus bauxite, the vast majority destined to China and Southeast Asia.
Speaker Change: Going forward, supply and demand fundamentals remain intact. Longer duration trades, the lower order book, and tightening GHG emissions regulations remain positive factors.
Speaker Change: Please turn to slide 26. The current order book stands at 10.3% of the fleet. Net fleet growth for 2024 is expected to be 3.2% and only 2.9% in 2025. As owners remove tonnage, that will be uneconomic due to the IMO 2023 CO2 rules.
Speaker Change: Vessels over 20 years of age are about 11.9% of the total fleet, which is slightly higher than the order book.
Speaker Change: In concluding our Dry Bulk Sector Review, continuing demand for natural resources, restrictions in transiting the Red Sea, war and sanction-related longer haul trades combined with slowing pace of new building deliveries all support freight rates going forward.
Speaker Change: Please turn to slide 28 for a review of the container industry. The Shanghai Container Freight Index, SCFI, is currently at 2303.
Speaker Change: In contrast to the previously mentioned box rate, container ship rates remain firm on the back of continued rerouting of vessels away from the Red Sea and around the Cape of Good Hope, causing TEU miles to increase by about 18% this year. As we noted last quarter,
Speaker Change: Pressure for time charter rates should remain for the duration of the Red Sea disruption. However, continuing record-building order books and record fleet growth should eventually modify these gains and reverse course when the Middle East conflict finally settles.
Speaker Change: Although trade is expected to grow by 5.4% in 2024 and 2.9% in 2025,
Speaker Change: New building deliveries in 2024 and 2025 combined will be equivalent to approximately 16% of the fleet, giving net fleet growth of about 10.3% this year, followed by 5.3% in 2025. This should continue to pressure rates for some time.
Speaker Change: Turn to the slide 29, Netflix growth is expected to be 10.3% for 2024 and a further 5.3% for 2025.
Speaker Change: The current order book stands at 24.7% against 14.3% of the fleet 20 years of age or older.
Speaker Change: About 80% of the order book is for 10,000 TEU vessels and larger. In concluding the container sector review, longer-term supply and demand fundamentals remain challenged due to economic and geopolitical uncertainties and an elevated order book.
Speaker Change: However, trade growth improvements, increasing ton miles and a world GDP growth of 3.2% for both 2024 and 2025 provide a counterpoint to a challenging 2025.
Speaker Change: This concludes our presentation. I would now like to turn the call over to Angeliki for her final comments.
Angeliki Frangou: Thank you, Ted. This completes our formal presentation and we open the call to questions.
Speaker Change: And ladies and gentlemen, at this time, if you would like to ask a question, please press the star and 1 on your touch-tone phone. You may remove yourself from the queue at any time by pressing star and 2. Once again, that is star and 1 on your telephone keypad, and we'll pause for a moment to allow questions to queue.
Speaker Change: Thank you for watching!
Speaker Change: We'll hear first from Omar Nocta at Jefferies. Please go ahead, your line is open.
Omar Nocta: Thank you. Hi, good morning, good afternoon. Thanks for the update.
Omar Nocta: You can tell very clearly from the presentation and the release, you're continuing to execute on the strategy, selling older vessels, acquiring newer ones, which are de-risked with the contracts on delivery, and clearly just adding more backlog.
Omar Nocta: You know, here recently we've seen several shipping markets sort of...
Omar Nocta: you know becoming a bit less exciting than than what we've been used to seeing the past couple of years. Ship values maybe look to have perhaps peaked or at least have been easing from the recent levels.
Omar Nocta: Is that something you're seeing, you know, pressure on asset prices and does that present an opportunity, you think, for Navias to take advantage, you know, perhaps of owners with weaker hands?
Speaker Change: Good morning and I think
Speaker Change: market in all the sectors of shipping. And I say surprisingly because basically, you have a dynamic growth in Europe, you have China, which is wobbly, I would say, and you have two geopolitical, you have two wars, Ukrainian in its third year and in a different phase, and with Israel in the second year again in a totally different phase.
Speaker Change: And we are being cautious, but we are focusing on these strategies, as you said. I mean, you saw that we added about $420 million of contracted revenue, $3.9 billion, modernizing our fleet.
Speaker Change: and focusing on the returning capital to our unit holders.
Speaker Change: I will not take a single weakness on a moment to say that I'll change the strategy. You have to view it in a longer term and, you know, to see really something changing.
Speaker Change: Thank you for watching!
Speaker Change: Okay, thank you for that and I guess...
Speaker Change: One month won't change the equilibrium. So you need to be focused on the long-term strategy because you really need to see a real trend out of that.
Speaker Change: Yeah, that makes sense, and I guess...
Speaker Change: You know you did mention just a month and you know or recently But you you take the body of work and over the past 12 months clearly markets have been fairly strong I guess when you think about as you mentioned there's two wars And there's just a lot of geopolitical and macro risks and obviously the election today in the US
Speaker Change: I guess just in general, you mentioned it doesn't change the strategy for Navios, but do you think about, when you think about the company going into 2025,
Speaker Change: Is there a part of the business where you want to add more fixed cover to just de-risk everything overall, or do you like the approach you have now, and is there any part of the business you think that just needs to have contract cover, whether that's tankers, dry or containers, as you look ahead?
Speaker Change: I will tell you one thing, the beauty of how we have modeled the business is we are opportunistic on the coverage. I mean we did amazing, we added a lot of contracted revenue in container sector which if you told me a year ago.
Speaker Change: I wouldn't have expected the strength. And we did an incredible, nicely adding almost 300 million in the container sector, which is very nice.
Speaker Change: So we have the luxury of selecting the moment that we add the contracted revenue so that we actually get very nice returns. So you are not going to go and sit on a weak moment on the market. So we do that opportunistically.
Speaker Change: It makes sense. Yeah, certainly. And I guess maybe just finally, you know, you've mentioned the capital returns, you have the dividend and the share of purchases. You've put $18 million to work here maybe over the past...
Speaker Change: I know you mentioned it's...
Speaker Change: It's at the discretion of the board and there's no promises, but just in general, as we think about the capital returns thus far, is this the type of pace you'd like to keep moderate or purchases on an ongoing basis? Any reason you think that you would need to slow that down or perhaps step it up?
Speaker Change: You know, we have the usual disclaimers, as you know, but we are deliberate with our strategy. We articulate it well in advance, and we are executing on that, even though we have to be cautious in this kind of a market. But we are here to execute on a very deliberate strategy.
Speaker Change: We also are a target on leverage, on modernizing our fleet, putting money to work, but we also feel that returning capital to our unit holders is part of our strategy.
Speaker Change: Thank you for watching!
Speaker Change: Yeah.
Speaker Change: Great. Well, thanks, Angeliki. That's it for me. I'll turn it over.
Speaker Change: Thank you. And we have no further questions from our group. Angeliki, I will turn the floor back to you for any additional or closing remarks you have.
Speaker Change: Thank you for watching!
Angeliki Frangou: Thank you. This completes our quarterly results. Thank you.
Speaker Change: Ladies and gentlemen, this does conclude our meeting for today. We thank you all for your participation. You may now disconnect your lines.
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