Q2 2019 Earnings Call
With a check from the company are chairman and CEO , Ms., Angeliki, Frangou, Chief Financial Officer, Mr., Georgia, Yeah.
<unk> commercial affairs, Mr., Tom Bini, and SVP of strategic planning Mr. Yada scary as a reminder, this conference call is being webcast to access the webcast. Please go to the investors section of Navios Maritime Holdings website at Www Dot Navios Dot com, you'll see the webcast link in the mail the page and a copy of the presentation referenced in today's earnings conference call can also be found.
Now I'll review the Safe Harbor statement. This conference call could contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 90 to 95 about Navios holdings.
Forward looking statements are statements that are not historical facts such forward looking statements are based upon the current beliefs and expectations of Navios Holdings management and are subject to risks and uncertainties, which could cause actual results to differ from the forward looking statement.
Such risks are more fully discuss in Navios holdings filings with the Securities Exchange Commission information set forth herein should be understood in light of such risks Navios holdings does not assume any obligation to update the information contained in this conference call.
The agenda for todays call is as follows will begin with formal remarks from the management team and after well open the call to take questions now I turn the call over to not get Holdings', Chairman and CEO Mrs. Angeliki Frangou Angeliki. Thank you know and good morning to all who joined US on todays call I am pleased with his knowledge for the second quarter of 2019 for the second quarter of 2019, we bought it the revenue.
47.2 million and adjusted EBITDA of 62.6 media start dates in the dry bulk sector, how the government after the tragic downplay option based deal in January of the bodies here.
They gave shai hi, P.C., they got to do over $75000 per day.
One of the men and at that time charter equivalent rate of $10500, but a day for the second quarter of 2019.
On slide three we highlighted this a bifurcation of the Navios group Navios acquisition Navios midstream in December of 2018.
In the fourth quarter of 2018, we moved the lifting of Anothers might then containers from Oslo, DC, because they're not that.
And most recently, we sold our Monaghan beaten this will penton media and the favorable it five year service agreement.
On slide four with focus on a diversified group as you guys see mother's mother was updated to be to buy more disappointment. Following an upgrade by S&P. In 2018 is because no leverage was 36.4% net debt to capitalization and strong cash flow with about she's got a 35 million of contracted revenue.
In addition in M.C.I., a container focused entity cisco's ever they never had and then Nate I think a company is operating in a hurry to charter rate environment, they're turning to South America.
Well the prospects of Navios logistics remain excellent validation being Greece. It Jay Smith I am on IR not so good in that an ACIP one facility at landmark pardon me that you know why overall, we continue to see opportunity for building and even more robust business in South America.
No five addresses the Salem by Navios Holdings, Oh, It see management division along with certain DB in the form of course that Asian 20 million plus a five year service agreement. The board of directors of Navios Holdings formed a special committee of independent and disinterested directors to consider that transaction.
The Special Committee will there be sensible to independent financial and legal advisors negotiated an approved the transaction on behalf of the board of directors bought into security Ace acted as the financial advisor the divorce and blamed on a and then B acted as legal counsel to this basin Committee as an example of this was after Navios holding is now a holding company that don't Drybulk vessels and was investment in entities owning my time and interest in actual asset, Georgia Nordisk will address this transaction in further detail in a moment slide six satellites you over there are the Asian developers, we purchased 82.2 million in phase one in our senior mortgage note, we have been any new in our fleet.
Own and bareboat charter in fleet. The average age decreased by 26% CES 2017, we acquired eight vessels with an average age of 4.2 here for 374.8 million shown 11 vessels with an average age of 16.7 years for 83.3 million.
Our charter in fleet strategy allows us to expand our fleet without an immediate capital, notably today, we have 26 vessels that they need to Indiana, which include purchase option slide seven sets forth navios cost structure I expected daily living for the remaining six months of 2019 is $14555. We think 62.7% of available days at an average daily rate of $30787. The revenue may increase by $447 based on the guidance and then they and then im mm dividend and dividend and further increased by $1321 from the effect of the Guy one here long a DC long historical ceilings I break even cost for the same period is expected to be $12458 per day.
Our cost include all operating expenses Jatin expenses, whereas other Flynn DNA cash expenses as well as interest expense and capital repayment that.
And I've made of charges to affiliate slide eight lives and liquidity basic position net debt to book capitalization was 74% and we had cash of a 122.1 million at June Thirtyth 2019, we have no significant committed Sip and Gulf Capex. We also have no material debt maturity and the January 2020 , two unless I 11, I bought the person board have is blinking maturity in 2020 , one I would like Mount to turn the call over to George Achniotis Navios Holdings CFO , George I think I gave you. Please turn to slide nine which they pay certain features of the state.
The consideration for the sale of the ship management company was 20 million, including the assumption of debt plus the five year service agreement under the administrative services agreement and Assembly provides all the administrative services and it will be reimbursed allocable costs under the management agreement Navios Holdings, we pay a favorable fixed rate of $3700 per day per vessel.
This fee will cover technical and commercial management services in all operating costs.
I've had dry docking and special surveys, we Israelis speaks for a two year period, increasing by 3% annually thereafter.
This transaction is beneficial to Navios holdings from a number of perspectives.
Financially the fixed rate for services is materially below the market. We review of third party data supports that Israel is at least 30% below other providers.
This transaction also eliminates the risk of providing fixed rate ship management services and there is for various environmental and other exposures associated with managing tankers and containers.
In addition, Navios holdings financial reporting will be simplified SLM will no longer consolidate navios containers.
Finally by virtue of the loan Navios Holdings will she was able to convert short term liabilities into long term liability.
Please turn to slide 10.
Following the sale of the management operations and music your loan facility of 125 million will be provided by NSM. This represents the excess of the liabilities as shown by NSM over the short term as industrial.
The loan will be secured by assets of Navios Holdings I was on those pledged to the bonds and it will it will be subject to 5% interest.
Although the 125 million for the 7 million would be repeatable in equal quarterly installments, beginning Q1 of two new trendy with their remaining principal amount payable in equal quarterly installments over the falling 48 months amortization maybe differs in certain cases provided that no more than 20 million of deferral, maybe outstanding during the first or second years, and 10 million outstanding is that the idea.
Amongst the fed will bear interest at 7%.
The numbers are subject to post closing adjustments. Please turn to slide 11 for a review of the Navios Holdings financial highlights for the second quarter of 2019.
Adjusted EBITDA for the quarter was 62 million.
Excluding navios containers, adjusted EBITDA was 49.8 million compared to 43.2 million and trendy 18, an increase of 15%.
EBITDA and net income for the quarter were adjusted to exclude that their demand a half million impairment loss on our investment in Navios acquisition.
And an 18.3 million book loss from the sale of four of our older vessels.
The increase in adjusted EBITDA is mainly due to a 14% increase in the without Navios, South American logistics, and a 5.7 million gain from the repurchase of our bonds.
EBITDA was negatively affected by an 11% reduction in the time charter equivalent rate achieved in the period compared to Q2 of 2018 due to the weaker dry bulk market.
Excluding navios containers during the quarter, we recorded a net loss.
Or four and a half million compared to a net loss of 18.7 million 2018.
The 76% improvement is mainly due to the increase in EBITDA reduction in depreciation and amortization due to the sale of the older vessels and it actually antennas expense due to the bond buybacks.
In addition in addition to the items that affected EBITDA net loss. It appears for the quarter was adjusted to exclude 20.2 million gain related to the tender of the preferred equity stock.
Please note that during Q3 following the sale of the Navios containers GP interest Navios continues we will be deconsolidated.
Moving to slide 12, and the first half financial highlights adjusted EBITDA for the first half 2019, excluding navios containers increased by 49% to 106.1 million from seven to 1.3 million in the first quarter 2018.
In addition to the items that affected Q2 would be that the first half results, where adjusted to exclude the five and a half million book losses relating to the sale of one more vessel in Q1.
Similar to the quarterly results the increase in adjusted EBITDA is mainly due to a 21% increase in baby Dove Navios South American logistics.
And then any half million, increasing the equity pickup for an affiliate companies mainly due to the significantly improved results of Navios acquisition near 21.4 million gain from the repurchase of our bonds.
Adjusted net loss for the first half 2019, excluding Navios containers was 4.3 million compared to a net loss of 52.8 million 2018 and improvement of 92%.
Moving to slide 13 in our balance sheet highlights I would like to point out that the balance sheet as of June Thirtyth does not reflect the sale of the management company.
As of June Thirtyth 2019, the cash balance was about a 122 million compared to 151 million at the end of December 2018.
The balance sheet reflects the effect of the adoption of the new standard.
Total assets include 336, we know of operating lease assets and today I believe this includes 349 million of operating lease liabilities.
Over the next few slides, we will briefly review our subsidiaries. Please turn to slide 14.
Following the sale of the job partner, excluding the IDR Navios Holdings owns 80 million half percent of Navios partners Navios partners owns a fleet of that seven vessels 32, dry bulk and five containers and mm also owns about 34% of Navios containers.
We expect to receive about two and a half million in cash dividends from an admin annually and since 2008 was just about 200 million in dividends.
Turning to slide 15.
Navios holdings owns about 6% of Navios acquisition.
Following the completion of the acquisition of anybody in December 2018, Navios acquisition has a fleet of 41 tankers, including 13 view Lccs.
We expect to receive about 6 million in cash dividends from an M&A during 2019 and since 2011, we saved about 91 million in dividends.
Moving to slide 16.
Navios holdings owns about 4% of Navios containers.
NMC I has grown its great to 20 129 containerships in just two years.
The company was established in early 2017 to leverage the weakness in the containership sector in scaling tablets flip quickly and efficiently.
Since December of 2018, Navios container shares have been trading on the NASDAQ blockbuster lexmark market, marking the next stage in its growth.
Now I will turn the call over to Gannett's capabilities for his review of the Navios South American logistics reasons gardens.
Thank you George.
Slide 17 provides an overview of the Navios logistics business Navios logistics operates three board permanent which are complemented by our barge fleet for even the transportation and a product tanker fleet. According to Commodore straight.
We are developing a new movie parables <unk> port facility in Mato Grosso, the food in Brazil.
The proposed facility will capitalize on the significant return and potential for even transportation grain exports and fertilizer and liquid imports.
We are still in preliminary stages, and we remain excited by the opportunity.
Please turn on page 18.
In the second quarter of 2019, EBITDA increased 23% to 27.5 million from 22.4 million in the same period last year.
Q2, 2019 Port segment, EBITDA increased 1% to 17.5 million.
Port segment revenue for the period decreased 22%. However, the reduction is a three attributable to lower sales of fuel products in our no margin trading business based in our liquid port terminal in Paraguay.
So weve been paradoxically model why has recovered from last years now with U.S.D.A. expecting a 113% increase in production in 2019 to two point 83 million metric don't compare to one point.
33 million metric tons in 2018.
Despite higher production in Q2, we experienced delays in exports of soybeans and definitely design throughput in our grain terminal in Q2 2019 increased by only 6% to 743000 metric tones from 701000 in the same period last year.
In Q3 export volumes have picked up and in July and August our throughput was 1.025 million metric tons compared to just 319000 metric tons in the same two month period last year.
We expect the impact of the volume recovery in the grain terminal to Port segment EBITDA to more pronounced in the second half of the year.
On the I don't know portside valent has indicated that they intend to increase by signing a 65% the iron ore and manganese throughput for the second half of 2019 compared to the same period last year volume estimate that is we can see approximately $1.2 million of maintenance in the second half of 2019 compared to 0.4 million tones in the second half of 2018.
Overall for 2019, we expect throughput will be about 1.6 million tones.
55% increase over the 1.1 million tons for 2018.
The expected rate on the second half of 2019 valley will be moving only about 60% of the 4 million minimum guaranteed for which we have paid annually.
In the bulk segment Q2 thousand 19 and be done increased 149% to 5.6 million.
From 2.2 million in the same period last year, mainly due to more liquid cargo transported as well as lower operating expenses.
Cabotage business Q2, 2019, EBITDA increased to 4.4 million compared to 2.8 million in the same period last year, mainly due to more operating days.
For Q2, 2009, P. net income was 9.7 million compared to 4 million in the same period last year. The increase is mainly attributable to the improved operating performance of our segments as well as lower interest expense and finance cost net.
Turning to the financial results for the six month period, ending June 32019 revenue includes increased 4% EBITDA increased 32% to 51.7 million and net income increased 409% to 15 million from 2.9 million in the same period last year.
Please turn to slide 19.
Navios logistics has a strong balance sheet cash at the end of Q2 2019 were 68.8 million compared to 76.5 million at the end of 2018.
Net debt to book capitalization was 55% compared to 56% at the end of 2018.
I would now like to turn the call over to Mr. Dong being Navios holdings SVP of commercial affairs.
Thank you Yanni.
Slide 20 presents our diversified dry bulk fleet, consisting of 57 dry bulk vessels totaling 6 million deadweight 18, Capes 28, Panamax nine supramax and two Handysize, we continue to be one of the largest US listed dry bulk fleet established over 60 years ago.
The average age of the fleet is 7.5 years.
24% younger than the industry average.
Navios groups total fleet of 196 vessels includes 54 tankers 46 container vessels and 96 drive focus it is a highly diversified public shipping group.
Please turn to slide 22.
The IMF forecasts world GDP growth of 3.2% to 2019 and 3.5% in 2020 in spite of the continued to U.S., China terrorist issues emerging and developing Asian markets, which drive drybulk demand are expected to grow at a healthy 6.2% in 2019 and 2020.
Due to the disruptions in the supply of iron ore at the beginning of the year goes by the Valley mine the accident in Brazil, and West weather issues in Australia. The BTI reached a low of 595 in mid February .
As iron ore shipments from both Australia, and Brazil returned to normal on the disruption from preparations for ARYMO 2020 commence drybulk rates are dramatically improve reaching a nine year high the BTI was 2518 yesterday levels not seen since November 2010.
Moving to slide 23, iron ore prices spiked to a high of $126 per metric ton early in early July 2019. Currently they are about $90 per metric ton delivered to China and prior to the Varli disruptions. The price was about $75 per metric ton due to restricted supply Chinese port stocks of Arnaud reduced by about 37 million tons in the year to the end of August .
Iron ore miners have brought additional production on line with valley and other Brazilian mine as increasing exports forecast show an increase of about 74 million tons in global iron ore exports between first half and second half 2019.
40 million tonnes of which will come from Brazil.
These Atlantic base exports will drive terminals going forward as China produces more still on restocks on or drawn down earlier this year.
Coal and grain exports are also forecast to increase between first half and second half 2019 or about 24 million tones.
At the same time, the Drybulk demand is expected to increase the supply of vessels expected to reduce during the second half of the year as vessels are retrofitted with scrubbers about 3% of the of the Capesize on above fleet is expected to be out of service in the second half of the year. Recent reports indicate shipyards are heavily congested as many ships head for retrofitting scrubbers in preparation for IMO 2020.
Turning to slide 24, Chinese steel production growth is an impressive 9% through July 2019.
Chinese steel exports continue to be high due to large infrastructure projects outside China.
The boat and road initiatives remain the cornerstone of Chinese economic plans for the next few years supporting steel and power demand domestically and abroad.
The Chinese government continues to stimulate their economy, so as to be by supporting new residential house building and secondly, with large infrastructure projects. This has resulted in a 9.5% increase in internal steel consumption through July 2019.
During the Q1 and Q2 iron ore supply disruptions Chinese steel mills have eaten through their stockpiles, which declined by about 37 million tonnes between June 18, and the end of August 2019.
With additional availability of iron ore in the second half of the year. The stockpiles will be replenished further driving demand for capesize vessels.
Please turn to slide 25 demand for coal in Asia remains strong.
Chinese seaborne coal imports increased by 7% through July 2019, India is expected to surpass China is the largest importer of coal in Asia in 2019.
Coal imports into India are up 22% remain.
Indian domestic coal struggles to overcome logistical issues and therefore coal imports are expected to remain strong.
Turning to slide 26 worldwide grain trade has been growing by 5.2% CAGR since 2008, mainly driven by Asian demand.
The trade war between the USA and China affected the slow grains in 2018 19, as a Chinese turn to South America for additional imports and reduced imports from the USA.
Forecast for large grain harvest in South America, Russia, and Ukraine will promote export sales going forward the south American crops. This year have been very good in soybeans, wheat, and maize and they continue to export in large quantities, taking advantage of the disruption in China USA trade relations.
Moving to slide 27, net fleet growth is forecast to be about 2.9% in 2019, but the effective growth will be less due to scrubber, Rick retrofits and ballast water treatment system installations throughout the latter half of 2019.
The current order book before non deliveries is about 11% of the fleet, which is one of the lowest on record Newbuilding contracting is down about 60% from 2018 levels. Therefore net fleet growth is expected to remain low over the next few years.
Turning to slide 28 vessels over 20 years of age or about 7% of the total fleet, which compares favorably with the 11% order book before non deliveries.
Scrapping so far in 2019 has already surpassed the total scrapping for 2018 by 1 million metric tons deadweight capacity.
The added cost for complying with IMO regulations for ballast water treatment systems on fuel regulations are expected to result in higher scrapping going forward.
The disruption caused by the IMO 2020 fuel regulations should provide support to the dry bulk market throughout the balance of 2019 and into 2020 tonnage supply will tighten as about 440 vessels from Supramax to Bobs remarks.
Our expected to head to dry dock for extended periods to retrofit scrubbers during the balance of 2019.
In addition, as discussed earlier close to 100 million.
Additional tons of three major commodities are expected to be shipped in the second half of the year compared to the first.
I would now like to turn the call back to Angeliki.
Thank you.
Thank you.
Ladies and gentlemen, if you wish to ask a question simply press Star then the number one on your telephone keypad.
At this time I'll turn the call back over to Angeliki Frangou for any additional closing remarks.
Thank you.
Today's call with <unk>.
As you stand to benefit from everything I buy as much.
Thank you ladies and gentlemen. This concludes today's conference call you may now disconnect.
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