Q2 2019 Earnings Call

Gosh acquisition Dot com see the webcast link in the middle of the page and a copy of the presentation referenced in todays earnings conference call can also be found there.

Now I'll review the Safe Harbor statement. This conference call could contain forward looking statements under the meaning of the private Securities Litigation Reform Act of 1995 about Navios acquisition forward looking statements are statements that are not historical facts such forward looking statements are based upon the current beliefs and expectations of Navios acquisitions 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 acquisitions filings with the Securities Exchange Commission. The information set forth herein should be understood in light of a trend now these acquisition does not assume any obligation to update the information contained in this conference call.

The agenda for today's conference calls this policy will begin this morning's call with formal remarks from management team and after well open the call to take questions now I turn the call over to Navios acquisitions, Chairman and CEO Mrs. Angeliki Frangou Angeliki. Thank you Laura and good morning to all of you join us on today's call I am pleased to report that for the second quarter of 2019, not leadership position, we recorded revenue of $58.6 million and EBITDA of $94.5 million.

Increases of about 40% and 130% respectively over the second quarter of 2018.

We continue to return capital to investors, we declared a quarterly distribution of 70 cents per share for the second quarter, reflecting a gun Hughes of about 21.6%.

In addition, we repurchased about 735000 says and I said purchase program.

Slide four presents some company highlights and their names as a core fleet before do I'm diverse tankers with an average age of 8.1 here. We also have a material investments in the dual Navios Europe and he did not own 24 vessels at the end of the second quarter of 2019, we had 80 points he's familiar in receivables from these entities.

We enjoy significant cash flow visibility, we have 430 million long term contracted revenue and half weeks, 90.2% of building available days for this for 2019.

About 67% of the of these days are fixed on the base rate of with 70% have profit setting.

About 23% of 2019 available days are fixed on floating rate.

The doctors with a diverse group of first class Counterparties.

We expect to generate more than 200.3 million contracted today, new Hello, My base are they tied to in 2019.

Slide five highlights key development.

We have spent quite a bit of time thinking about and the work indoors any financing of that deal would be.

We are pleased to announce that we expect to bleep. They these 896.8 million balance within the second half of 2019.

In addition, the refinancing that there will be dead redemption is a priority, we expect to reduce debt by 3% or 33.4 million by bleeping adore them of 218.3 million dead through 184.8 million in proceeds from new financing arrangement, Washington residences and utilization of Obama He's got.

I have two they shouldn't be activity, we began renewing our fleet in 2018, one asset values will weaken since then we have been saying all the vessels and committing to new bareboat charters year to day wish all three of our all the Mpcs in committed funding you build vlccs under bareboat gone drugs, which will be delivered in 22, Nd and 2020 one.

We view these bare board these as providing reasonable financing well before acquiring new vessels without initial capital outlay.

Slide six details our financing efforts for the term loan b the outstanding balance of the term loan b well that had a 90 618, we will we be repaid using proceeds from 15 million Japanese leased facility, a 138 million Chinese leasing facilities 51.8 million of bank bleach facility would be subject to approvals and 12 million of gas from my balance.

Slide seven shows our liquidity position, we have 42 million in Gaza as of June 32019, and 67.2 million in cash pro forma for the sale of the novel in London, and the net debt because they're lazy Asian is 74.2%, we'll have fully funding our growth come back.

Pro forma for the payment of the term loan B, we do not have any significant debt maturities until 2020 one.

Slide eight shows the expected cash flow breakeven for the second half of 2019, 83.1% or one available days ethics at an average rate of $17994.

Net that day.

Our daily cost is about $70979 per day, and not 2997 opened last loading the they are expected to provide.

A breakeven of $17956 per day.

And then of course calculation includes fixed operating expenses dry docking amortization general and administrative expenses interest expense and capital payment.

Slide nine shows the expected cash flow potential for the second half of 2019, we have 2997 open days plus days contracted on floating rate. Therefore, and then they sleep is expected to generate significant free cash flow.

At forward at a weighted by and then they sleep, we would generate about 20 million of free cash flow at this point I would like to turn the call over to Mr. that the throne. Thank you Angeliki and good morning, All please turn to slide 11.

Navios acquisitions diversified fleet consists of 41 vessels with an average age of 8.1 years totaling 5.5 million deadweight. The fleet consists of 13, Vlccs eight LR ones 18, and more twos product tankers and two chemical tankers.

Three VLCC bareboat Newbuildings are scheduled for delivery in 2020 or 21.

Please turn to slide 12, slide 12 details, our chartering strategy, which we used to balance market opportunity and credit risk, we seek protection from market volatility by attaining charters a different durations in order to better manage market cyclicality in 2019 about 57.7% of our fleet.

Available days are fixed at a base rate or a base rate plus profit sharing and about 25.4% our fixed on floating rates. We continue to monitor the market and look to gradually charter our fleet recovering rates any market improvement will be captured through one of three methods. One days with fixed rate two days with floating rates or three days with base rate plus profit sharing.

Please turn to slide 13.

Navios acquisition continues its policy of locking in secure cash flow with creditworthy Counterparties. Our fleet has secured about 430 million in long term contracted revenue to the middle of August we extended the coverage of our fleet for approximately eight years via new fixtures continuations, an exercise optional periods at higher levels in some cases with profit sharing.

Please turn to slide 14.

Slide 14 shows in detail our current charters with their respective expected expiration dates our chartering strategy revolves around capturing market opportunity. While also developing dependable cash flow from a diverse group of first class charters.

Through our profit sharing arrangements, we can capture and benefit from market improvement over our current charter rates.

Turning to slide 16, the IMF projected global GDP growth of 3.2% in 19, and 3.5% in 2020 with emerging and developing markets growing at 4.1% 19 and 4.7% in 2020.

The main structural drivers going forward are moderate VLCC fleet growth, increasing demand from Asian economies, particularly China, and India and increasing supply from the Atlantic Basin.

Turning to slide 17.

The April record of 12.2 million barrels per day solidifies the U.S. as the world's largest crude oil producer. The U.S. crude exports have continually expanded since 2015, when first three authorized reaching a record 3.1 million barrels per day in June of this year from almost zero in 2012.

In terms of ton miles.

The movement of crude from the Atlantic Basin to China uses about as many vlccs as the movement from the Arabian Gulf, even though the Arabian Gulf shipped about two times more oil to China.

Increases in Atlantic Basin crude going to the far east will continue to create more demand to the ulccs as U.S. export capacity increases you as China trade issues get resolved and Atlantic basin countries begin and expand exports over the next couple of years.

In the short term measures such as Saudi Arabia is expansion of crude shipments from the endo to avoid the Straits of hormones will add approximately 10% the typical AG forest VLCC round trip voyages.

Please turn to slide 18.

In July 0.8% as a VLCC fleet was out of service due to scrubber retrofitting the supply of the Fccs and are scheduled to be out of service for the remainder of this year to set to increase to about 2.7%. This should tighten vessel availability and support time charter rates overall, 2.1% of the crude tanker fleet is expected to be out of service due to retrofitting.

Please turn to slide 19.

Net fleet growth through last year equaled, 5.4% was 45 deliveries against six Remodels. We note that while the order book shows 77 days as of August 12 Euro 190. These over 17 years of age.

With the upcoming IMO 2020, and ballast water management regulations that will lead to some vessel region retirement, we believe that the order book and fleet are well balanced.

Turning to slide 21.

According to the IEA refinery capacity is expected to increase by 13.7 million barrels per day from sort of 2019 to 2024, including all additions expansions and upgrades about 74% of that capacity will be added in Asia and the middle East with the IEA a project in China and other non OE CD Asia to increase refinery capacity by 5.2 million barrels and 2.4 million barrels respectively.

Turning to slide 22, U.S. crude production has risen about 130% since the end of 2008, reaching 12.2 million barrels in April this year.

Hi, its level of production since record started 1920.

U.S. has increased its total product exports by about 500% to about 5.5 million barrels per day since 2004.

Please turn to slide 23.

Record refinery maintenance peaked in may at 7.4 million barrels per day, partly due to preparations for increasing product demand associated with IMO 2020.

The balance of the refinery capacity is set to rise.

By approximately 4 million barrels per day due to a combination of new refinery additions and a significant reduction in refinery maintenance at refineries get ready for this historic fuselage.

Please turn to slide 24.

Through July of this year. The fleet grew 3.2% on deliveries of 5.7 million deadweight less zero, a half a million deadweight of demolition.

About 5.8% of the product fleet is 20 years of age or older as of August Onest of this year. There were 192 product tankers on order and 362 Whats your 17 years of age or older. The total order book is much less than those ships 17 years age and older, particularly given historical non delivery rate.

Becoming ballast water and IMO 2020 rules and scrap prices remain high.

As a result projected net fleet growth for 2019 is 3.9% the second lowest growth in five years, which should support current time charter levels.

Thank you. This concludes my review and I would like now turn the call over to Loonies chorus for the Q2 financial results.

I think that I will discuss the financial results for the second quarter and the six month period ended June 32019, Please turn to slide Lymphoseeks revenue for Q2 2019 increased by 41.2% to 58.6 million from 41.5 million in Q2 2018, reflecting the increased use of Navios acquisition. Following the merger with Navios Midstream partners in the boot blade environment compared with the same period last year.

In Q2, 2019, we had 99.8% fleet utilization, we achieved a time charter equivalent of $15525 per day improved from the $15260 per day achieved in the second quarter of 2018.

Time charter and voyage expenses fell 4.2 million, mainly reflect expenses relating to our vision spot volumes during the quarter.

Operating expenses were 26.5 million, India may expenses were 6.8 million.

EBITDA for Q2 2019 increased by more than two times to 24.5 million from 10.7 million in Q2 2018.

Other expenses include depreciation and amortization of 17.3 million interest expense and finance cost of 23.7 million as a result, we reported a net loss for the quarter or 16.6 million.

Turning to the financial results for the six month period ended June 32019 revenue increased by 54.9% 235.7 million from 87.6 million last year, reflecting a time charter equivalent of $17635 per day in a 99.8% fleet utilization operating expenses were 54.4 million, India May expenses were 11.9 million EBITDA for the first half of 2019 increased by more than three times to 66.1 million from 19.5 million in 2018.

Depreciation and amortization was 35 million and net interest expense and finance cost was 46.6 million.

As a result, we reported a net loss of 15.7 million.

Slide 27 provides selected balance sheet data as of June 32018, cash and cash equivalents, including restricted cash was 42 million pro forma for the shape of Nava electron we actually see our cash position increased to 67.2 million vessels net book value was 1.3 billion total assets amounted to 1.6 billion. The total debt as of June 32019 was 1.2 billion, resulting to a net debt to capitalization ratio of 74.2%.

Please turn to slide 28, essentially dimensional we expect to prepay our term loan b within the second half of 2019, the new credit facilities that will replace the term loan b consist of the following.

50 million sale and leaseback arrangement with a much wider you'll five years interest of LIBOR plus 345 beats spin are known to finance one product tankage leased facility was thrown in Q3 2018 and the net proceeds were used to partially repay the term loan b.

Up to 90.8 million sale and leaseback arrangement to finance six product tankers, which will be repaid through an average period of 6.4 years in consecutive quarterly installments within interest of LIBOR, plus a margin ranging from 35 to 65 beats, but depending on the basins finance.

Up to 47.5 million sale and leaseback arrangement that we financed three product tankers, which will be repaid through another its period of 5.5 years in consecutive quarterly installments with him interest of LIBOR, plus a margin ranging from 350 bips to seek the beeps opinions depending on other basins finance.

In addition, any amazing advanced discussions with a commercial bank for the beach facility of up to 31.8 million to finance one VLCC.

Following the completion of Foldable financing arrangements along with the recent repayment of 21.5 million Bank facility. Our debt is expected to decrease by 3% or 33.4 million.

Turning to slide 29 as for return of capital to shareholders for the second quarter, we declared a dividend of 30 cents per share equivalent to $1.20 cents on an annualized basis. The dividend will be paid on October nine 2019 to shareholders on record as of September 25, 2019.

We have also repurchase 0.7 million common shares through our share repurchase program, providing an additional 5.4% return to our stockholders and now I would like to pass the call to answer a leaky for his final remarks, and say look him.

Thank you hear these open.

Thank you if you'd like to ask a question. During this time simply press Star then the number one on your telephone keypad.

Your first question is from Chris why the painful situation.

Yeah. Thanks, good morning, guys.

I wanted to.

Specifically about.

Slide.

Hi, like some of that.

Sure.

Yes.

When we think about 2020.

Numbers might look like how much carryover potential is there I don't think that everybody.

Rubber installs before year end.

We have some.

It could help sort of soften.

Deliveries.

The normal sort of schedule.

I would expect next year.

Yes.

It is expected that actually plays.

Right.

Yes, we always thought for this line.

They have a 60 day delay.

She gets cannot believe that timeline.

Eric maybe.

2020 .

Now the one thing that they will.

Environment.

Talking about the day 40000.

Previous job.

Well.

In the beginning of the year.

Well, what an angel.

Even though.

He's gone up continue to guess Rodney.

On the dry dock.

Also I think mark.

That said that.

Longer term mine.

Exports.

So.

This program and that's something that we.

And they are getting older.

Taking back and all that.

But on the other side.

So that.

On my mind expanding.

Okay. So you have two different sizes yet.

Well as supplies sort of interactive area.

I just want to make sure I'm clear.

You didn't give a number the expectation is for some of this dry docking delayed spill over 2020 right there should be some.

At at least in the first half of next year.

Yes, definitely I mean, we have seen.

Situations.

Right.

They do that.

Without government being extended.

So I think that.

Sorry long queues.

In Cleveland is not delivering on time, all that on I mean.

That sounds very very much.

The market.

Okay got it and then.

Further sort of thinking about that.

This year in terms of.

Relatively elevated non deliveries being relatively low when you think about sort of turning the page into 20 Twond.

Given the dynamics of the IMO.

Should we expect sort of resurgence of some of those either non delivery numbers or.

About scrapping next year.

Yes.

I think you'll have no longer experiences keeping you know that when they just don't get environment people don't screw up.

But the reality is that you'll have to tackle that.

Right.

Conditions out there.

The most important thing.

Like point of view is that the orders.

But my meter.

Deadweight zones.

But if it does.

Sure.

If you have a little bit.

Shelf that market at one point or another season.

Oh, and then you have.

The daily rate that he'd hill.

And basically you have no orders have been play in that.

Right now knowing awarded I think that.

Good situation is what it is.

What we see we think this year and next year.

Hey, Raimo that.

All their lives okay.

Yes, and yes.

Almost nothing.

And no new orders.

I mean, it could again.

So what we see right now.

Okay. Okay.

Helpful.

I was going to say I think that overall the order book is less than 10% of the v. So its very low historically so.

No we've got high rates in the face of record deliveries at the beginning of the year. The first half together, which has peaked as Angeliki said.

So besides the whole IMO issue.

It's under it looks like some of them many of them underestimated the tab.

Supply demand fundamentals the better there's more does longer ton miles that U.S. Gulf exports of crude.

You know the Iranian storage isn't going to go away pretty soon you got all these refineries opening up in the far east now to be fair.

With.

So I think going forward.

You know the forward curve is telling you something.

Yes, Okay got it that's very helpful. And then you know.

I wanted to focus a little bit on the balance sheet, obviously, some progress being made.

The 2020 maturities.

Laurel yet bullets.

What are the thoughts or potential options on the table for 2021, So obviously, a bigger number that sort of tackled at that point, how do you think about that.

In terms of when should we think about hearing more from a timing perspective about what you may do around the 2020 maturities.

Yes.

You know that he.

It's something that we are constantly looking them in bed and adapt.

So.

We worked.

And.

Yes.

The next thing is.

Right.

There's any payment and also.

And that.

Yes.

Okay. Okay.

Great Awesome, thanks, very much for the time I appreciate it.

Thank you.

That's all my questions for today I would now like to turn the call back over to Angeliki Frangou for any closing comments.

Thank you this completes our quarterly report.

Thank you ladies and gentlemen.

This concludes today's conference call you may now disconnect.