Navios Maritime Holdings Inc (NM) 2021 Q1 法說會逐字稿

Good morning, and thank you for joining Navios Maritime Holdings First Quarter 2021 Earnings Conference Call. We're pleased to host this call from Georgetown in the Cayman Islands.

With us today from the company are Chairman and CEO, Ms. Angeliki Frangou; Vice Chairman, Mr. Ted Petrone; Chief Financial Officer, Mr. George Achniotis; SVP of Strategic Planning, Mr. Ioannis Karyotis.

I will now turn over the call to Ms. Laurie Yagerman, who will take you through the conference call details and safe harbor statement.

Thank you, Michael. As a reminder, this conference call is webcast. To access the webcast, please go to the Investors section of Navios Maritime Holdings website at www.navios.com. You'll see the webcast link in the middle of 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 1995 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 statements. Such risks are more fully discussed in Navios Holdings' filings with the Securities and Exchange Commission. The information set forth should be understood in light of such risks. Navios Holdings does not assume any obligation to update the information contained in this call.

The agenda for today's conference call is as follows. We will begin this morning's conference call with formal remarks from the management team, and after, we will open the call to take questions.

Now I will turn the call over to Navios Holdings' Chairman and CEO, Ms. Angeliki Frangou.

Thank you, Michael, and good morning to all of you joining us on today's call. I am pleased with our results for the first quarter of 2021.

In the first quarter, Navios Holdings reported revenue of $117 million and adjusted EBITDA of $48.6 million. The global pandemic continues to subside as vaccine rollout grows. We believe this development, along with accommodative fiscal and monetary policy measures, are propelling economic activity. In April, the IMF increased its forecast for 2021 GDP growth to 6%, instilling optimism about demand for dry bulk vessels for 2021.

Please turn to Slide 4. As you can see, Navios Logistics is growing its port business, developing critical infrastructure for transshipping minerals and grains. Navios Logistics is a leading infrastructure and logistics company in the Hidrovia region. The company maintains a 60% net debt-to-book capitalization for Q1 2021.

The stability of the underlying business can be seen in the trading level of the bond, which trades at a premium to yield around 6.6%.

In Q1 2021, Navios Partners completed the acquisition of Navios Containers. The diversified company is in the top 10 of publicly listed company in terms of dry cargo fleet. NMM has about $850 million in remaining contracted revenue and low leverage at 38.3% net debt-to-book capitalization as of Q1.

Navios Acquisition, a tanker company, generated about $190 million in 2020 EBITDA and has about $500 million in long-term contracted revenue.

On Slide 5, we show world GDP growth since 1970. As you can see, global GDP growth is projected to be 6% in 2021. Not only is this the highest growth rate in the past 50 years, but we believe that the percentage increase masks the potential impact. Nominal global GDP in 2019 was about $88 trillion. This is almost 30x larger than the global GDP of $3 trillion in 1970. Stated another way, the expected 2021 GDP growth is almost 2x the entire GDP of the gold in 1970. Consequently, we are optimistic about demand for dry bulk vessels for the remainder of 2021.

Slide 6 highlights our recent developments. During Q1, we generated $117 million in revenue and $48.6 million in adjusted EBITDA. We also achieved an average time charter rate per day of $17,864 for our Capesize vessels, $13,091 for our Paramax vessels, and $11,500 for our Ultra-Handymax vessels.

As an update to our S&P activities year-to-date 2021, we agreed to sell 5 vessels for $65.1 million. Please review the slides for the details of the vessels sold.

Year-to-date, we have also repaid $71 million of our debt facilities.

Lastly, as an update on Navios Partners, the company has 89 diverse vessels and is one of the top 10 publicly listed dry cargo fleet globally. As of May 21, our ownership in NMM equals 11%, worth $84.5 million.

Slide 7 goes through our gathering strategy and potential operating cash flow generation for the remaining 9 months of 2021. Our 43 vessels fleet has $11,443 in total available days for the remaining 9 months of 2021. Operating breakeven is estimated at $17,317 per open index-linked day. The total weighted average rate for our fleet open and index days based on current market rates is $29,014 per day. 64.8% of our available days are exposed to the spot market so that we can capture market upside.

Slide 8 highlights our liquidity position. As of March 31, 2021, our net debt to capitalization was 98.2% and we have cash of $60.1 million.

I would like now to turn the call over to Mr. George Achniotis, Navios Holdings CFO. George?

Thank you, Angeliki. Please turn to Slide 9 for the review of the financial highlights of the first quarter of 2021.

Adjusted EBITDA for the quarter increased by almost 70% to $48.6 million compared to adjusted EBITDA of $28.7 million in Q1 of 2020. EBITDA and net income for Q1 of 2021 were adjusted to exclude a gain of $26.4 million relating to the merger of Navios Partners with Navios Containers and an impairment of $20.5 million relating to the sale of 3 vessels. The increase in adjusted EBITDA is mainly attributable to the increase in the TCE rate achieved in the period, which more than doubled compared to Q1 of 2020.

Adjusted net loss for the period was $5.8 million compared to an adjusted net loss of $23.8 million in 2020. The 75% improvement is mainly due to the improvement in adjusted EBITDA, and it was partly mitigated by about $4.6 million increase in interest expense, mainly due to the new bond of Navios South American Logistics.

Please turn now to Slide 10, where the balance sheet highlights are presented. As of March 31, 2021, we have $60 million in cash compared to $111.2 million at December 31, 2020. During the quarter, we reclassified the senior and ship mortgage notes from long-term liabilities to current liabilities as they are both due within less than 12 months.

Over the next few slides, I will briefly review our affiliates. Please turn to Slide 11. The merger between Navios Partners with Navios Containers was completed on March 31, 2021. The transaction builds scale through a larger diversified asset base with an increased earnings capacity. NMM now has a fleet of 89 vessels and is one of the top 10 dry cargo publicly listed companies.

Approximately half of the fleet is dry bulk vessels and the other half is containerships. They are a large entity will also benefit from a simplified capital and organizational structure, thereby reducing costs. Following the merger, Navios Holdings owns 11% of Navios Partners.

Turning to Slide 12. Navios Holdings owns about 29% of Navios Acquisition. NNA has a fleet of 45 tankers, including 12 VLCCs. The pandemic has had a material impact on the tanker sector. Early in 2020, the need for storage drove tanker charter rates higher. As the pandemic progressed, the recession in the travel industry, which drives significant oil demand, affected oil transportation.

While the outlook is much brighter now with countries rolling out vaccination programs and the travel industry showing signs of revival, the market still remains difficult today.

This concludes my presentation. At this point, I will turn the call over to Ioannis Karyotis for his review of the Navios South American Logistics results. Ioannis?

Thank you, George. Slide 13 provides an overview of Navios Logistics, which, as you know, is a consolidated subsidiary of Navios Holdings and a reportable segment in Navios Holdings' financial statements.

Navios Logistics operates 3 port terminals, which are complemented by our barge fleet for river transportation and product tanker fleet for coastal cabotage trade. Our last 12-month adjusted EBITDA was $93 million.

As you know, we commenced the process for a potential registered public offering in the United States and in Brazil, subject to market conditions and other factors in each of those markets. As a result, we are in a quiet period and will not be answering questions with respect to Navios Logistics business or financial results.

Please turn to Page 14. In the first quarter of 2021, EBITDA increased by 5% to $23.6 million from $22.5 million in the same period last year. Q1 2021 port segment EBITDA increased by 29% to $17.8 million. The increase was mainly attributed to higher throughput in the grain terminal. During the quarter, we moved 583,000 tons of grains compared to just 194,000 in the same period last year.

On the iron ore side, Vale did not move cargo through our terminal during the quarter as we understand they are selling more iron ore to Argentina. However, under our take-or-pay contract with Vale, we are earning revenue per the guaranteed quantity of 4 million tons per year. Vale resumed transshipments in our terminal in early April.

Vetorial resumed operations in March, moving 116,000 tons after having suspended transshipments due to low water levels in the river system in the prior period.

Amid strong demand for iron ore in the current environment, we're receiving inquiries from potential clients for transshipment of iron ore that originates from Corumba, Brazil and Bolivia.

In the barge segment, Q1 2021 EBITDA was $4 million compared to $4.7 million in Q1 2020. The decrease is attributed to higher operating costs from increased utilization of our convoys to service the contracts of affreightment and voyage charters that replace certain legacy time chartered contracts that expired through 2020.

During the first quarter, our newly built 6 liquid barges commenced their 5-year time chartered contracts from which we expect to generate approximately $4.7 million annual EBITDA.

In March 2021, we acquired 3 push boats and 18 tank barges and commenced an associated 5-year take-or-pay contract of affreightment for transporting fuel. We expect to generate approximately $8 million annual EBITDA from this contract.

In our cabotage business, Q1 2021 EBITDA decreased to $1.8 million from $4 million in the same period last year, mainly attributable to lower time charter rates and fewer operating days due to market conditions.

For Q1 2021, profit for the quarter was $2.5 million compared to $6.9 million in the first quarter of 2020. This decrease was mainly attributable to $5.1 million higher finance costs, mainly due to the new senior notes.

Please turn to Slide 15. Navios Logistics had a strong balance sheet with no significant maturities until 2025. Our bond is trading above par, yielding 6.6%. Cash and cash equivalents at the end of the first quarter of 2021 were $40.3 million compared to $74.9 million at the end of 2020. During the quarter, we paid $15 million related to the $30 million acquisition of the 3 push boats and 18 tank barges with the balance to be paid in 3 equal annual installments. Net debt-to-book capitalization was at 6%.

I would now like to turn the call over to Ted Petrone.

Thank you, Ioannis. Please turn to Slide 16. Slide 16 presents our diversified dry bulk fleet consisting of 43 vessels, totaling 4.8 million deadweight. 15 Capes, 23 Panamaxes, 4 Supramax and 1 Handysize. We continue to be one of the largest U.S. listed dry bulk fleet established over 65 years ago. The average age of the fleet is 8.3 years, 22% younger than the industry average. Navios Group's total fleet of 185 vessels include 94 dry bulk vessels, 53 tankers and 38 container vessels. Navios is a highly diversified public shipping company.

Please turn to Slide 17. Slide 17 highlights our ESG initiatives. Maritime shipping is the most environmentally friendly means of transportation as it is the most energy and carbon efficient mode of transport. We aspire to have zero emissions by 2050.

In this process, we have been pioneering and are adopting certain environmental regulations up to 2 years in advance, and we aim to be one of the first fleets to achieve full compliance.

Navios is socially conscious group whose core values include diversity, inclusion and safety. We maintain policies and procedures that provide effective corporate governance and a clear code of ethics. Our Board is composed of a majority of Independent Directors and independent committees that oversee our management and operations.

Please turn to Slide 19. Q1 of 2021 was the strongest opening for any year in the last 10 years. Counter seasonal demand and restocking drove exports, which propelled the BDI Q1 average to $1,739, 3x the level of the same quarter last year. As of yesterday, the BDI stands at $2,754, with a year-to-date average up over 250% compared to the same period last year.

The recent strength in Capes rates can be attributed to increased iron ore and coal exports. Additionally, surging oil trade, driven by strong demand for both major and minor bulk commodities, is supporting rates in all asset classes.

Government emergency monetary intervention and the evolving vaccine rollout has kickstarted a faster-than-expected recovery in the world economy. It is likely the IMF to increase its 2021 GDP growth projection to 6%, the highest in 50 years, led by an 8.6% expansion in China, India and developing Asia. 2021 dry bulk trade is expected -- projected to increase by 3.7%.

Please turn to Slide 20. Slide 20 shows demand is forecast to outpace net fleet growth in both 2021 and 2022. The graph on the left shows that for 2021, dry bulk demand for the 3 major cargoes of iron ore, coal and grain is forecast to increase by 3.7% compared to 2020.

If you look at the graph on the right, net fleet growth is forecast to be 3.1% this year and only 1.2% for 2022. Net fleet growth is expected to remain low over the next 2 years as the order book is lowest on record.

Turning to Slide 21. Despite the pandemic, global iron ore demand is expected to increase by 3.3% this year. Additionally, availability of iron ore shipments to China are expected to increase as steel mills replenish stockpiles driving demand for Capesize vessels. A key source of additional ton-mile trade will come from Brazil, which is forecast to increase exports by 9.7% or 33 million metric tons after hitting a 6-year low in 2020.

Forecasts are also for growth in iron ore inputs around the world as the effects of the pandemic recede. Europe's imports are expected to grow by 17% and Asia, excluding China, is expected to import 13% more iron ore in 2021 than in 2020.

Please turn to Slide 22. Asian coal imports, which account for over 80% of world seaborne coal trade, are expected to increase by 3.8% in 2021, following a decline of 6.3% in 2020. The 2020 decrease was mainly attributed to India and Chinese coal imports declining by 11% and 8%, respectively. Vietnam and other Southeast Asian countries increased coal imports by 11% in 2020 and are expected to further increase imports by 8% this year.

Turning to Slide 23. An ever-increasing world population with security issues driven by the pandemic as well as increasing protein demand worldwide continue to support the global grain trade. Global grain production this year will reach a record according to International Grain Council and the USDA.

Worldwide grain trade has been growing at 5% CAGR since 2008, mainly driven by Asian demand, which increased by 15.5% in 2020 and is expected to ease a further 5.8% in 2021. Overall, total world grain trade increased by 7% in 2020 and is expected to increase by 2.5% in 2021.

Please turn to Slide 24. The current order book stands at a low 5.8% of the fleet. Newbuilding contracting was down 43% in 2020 compared to 2019. Accordingly, 2021 net fleet growth is expected at 3.1% and only 1.2% for 2022, below the projected increase in dry bulk demand for both years.

Turning to Slide 25. Vessels over 20 years of age are about 7.5% of the total fleet, which compares favorably with the previously mentioned record low order book. Scrapping totaled 15.8 million tons in 2020, almost double the 2019 total. Year-to-date scrapping has totaled 4.5 million tons, which is on pace for a total of about 11 million ton.

In conclusion, positive demand fundamentals, mainly due to strong restart of economic activity around the world, along with reduced fleet availability to continue to support the dry bulk industry and its continuing effort to navigate through this easing pandemic storm.

This concludes my presentation. I would now like to turn the call over to Angeliki for her final comments. Angeliki?

Thank you, Ted. This completes our formal presentation. We'll open the call to questions.

(Operator Instructions) And at this time, I'm showing no questions. I'd like to turn the floor back over to Ms. Angeliki Frangou for any additional or closing remarks.

Thank you. This completes our Q1 results. And we see that as the pandemic is subsiding, we see materially -- a material improvement in the market. Q1 2021 over Q1 2020, we saw rate more than double. And Q4 -- Q1 2021 versus Q4 2020, we see a 9% increase. And as we move to the second quarter, we see over 50% increase in the BDI.

So with a lot of available base being open or index-based, we have 11,400 days for the remaining 9 months. Our company will be able to capture a lot of the upside. And with that, thank you very much. This completes our Q1 results.

Thank you. Ladies and gentlemen, this does conclude today's call. You may now disconnect.