Navios Maritime Holdings Inc (NM) 2020 Q4 法說會逐字稿

Thank you for joining us for Navios Maritime Holdings Fourth Quarter and Full Year 2020 Earnings Conference Call. With us today from the company are Chairman and CEO, Ms. Angeliki Frangou; Chief Financial Officer, Mr. Georgios Achniotis; Vice Chairman, Mr. Ted Petrone; and Senior Vice President of Strategic Planning, Mr. Ioannis Karyotis.

As a reminder, this conference call is being webcast. To access the webcast, please go 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 will also be found there.

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

Thank you, Doris, and good morning to all of you joining us on today's call. I am pleased with the results for the fourth quarter and full year 2020.

For the full year of 2020, Navios Holdings reported revenue of $416.7 million and adjusted EBITDA of $153.4 million.

For the fourth quarter, Navios Holdings reported revenue of $102.4 million and adjusted EBITDA of $37.6 million. Although dry bulk demand in the first half of 2020 was hurt by the global pandemic and many economies shut down, fiscal stimulus and other policy measures helped global economies rebound in the second half of 2020 and throughout Q1 of 2021.

As the global vaccine rollout continues, we believe that regulation, along with the policy measures taken to date, will propel economic activity and indeed, the IMF recently increased its forecast for 2021 GDP growth. Consequently, we are optimistic about the demand for dry bulk vessels throughout 2021.

Please turn to Slide 4. Navios Logistics continued to grow its port business, developing critical infrastructure for transshipping minerals and grains. Navios Logistics has grown into a leading infrastructure and logistics company in the Hidrovia region.

In 2020, the company generated about $92 million in adjusted EBITDA and maintains a 56% net debt-to-book capitalization for the full year of 2020.

Navios Logistics also continues to pursue the process of becoming publicly listed.

The stability of the underlying business can be seen in the trading levels of the bond, which trades at a premium to par to yield around 6.3%.

In 2021, Navios Partners acquired Navios Containers. The enlarged company is a top 10 publicly listed company in terms of dry cargo fleet.

NMM has about $900 million in remaining contracted revenue and low leverage at 40% net debt-to-book capitalization as of Q4.

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

On Slide 5, we lay out world GDP growth since 1970s. As you can see from the chart, the IMF expects global GDP to grow at about 6% in 2021. This would be the highest GDP growth rate in the past 50 years.

Importantly, the percentage increase perhaps understates the impact. For example, the normalized GDP in 2019 equaled about $88 trillion, almost 30x the global GDP of $3 trillion in 1970. To understand this magnitude, consider that the amount of growth this year will be almost 2x the entire GDP of 1970.

Slide 6 highlights recent developments. During Q4, we generated $102.4 million in revenue and $37.6 million in adjusted EBITDA. We also achieved an average time charter rate per day of $17,553 for our Capesize vessels, $11,911 for our Panamax vessels and $9,405 for our Ultra-Handymax vessels.

As an update to our S&P activities, we have sold 3 vessels and have agreed to sell an additional vessel for a combined sales proceeds of $56.6 million.

In 2021, we repaid $36.2 million of bank facilities.

Navios Partners completed its merger with Navios Container and now consists of 86 diverse vessels. Navios ownership in NMM after the merger is 12.6% and has a market value of $74.7 million as of April 19, 2021.

Slide 7 goes through our chartering strategy and potential operating cash flow generation at current market rates. Our diverse fleet comprises of 45 vessels, has 15,767 available days for 2021. Our operating breakeven is estimated at $17,472 per open day. The total weighted average rate for our fleet, open and index days, based on current market rates is $25,203 per day. As 51.7% of our available days are exposed to the spot market, we are positioned to capture market upside.

Slide 8 highlights our liquidity position. As of December 31, 2020, our net debt-to-book capitalization was 95%, and we have cash of $111.2 million.

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

Thank you, Angeliki. Please turn to Slide 9 for a review of the Navios Holdings financial highlights for Q4 and the full year 2020. Adjusted EBITDA for the quarter was $37.6 million compared to $74.7 million in Q4 of '19.

EBITDA and net loss for the fourth quarter were adjusted to exclude $60.5 million impairment losses relating to some of our vessels and $13.4 million impairment loss relating to our investment in Navios acquisition. EBITDA and net loss for the fourth quarter of 2019 were adjusted to exclude a $130.6 million impairment losses relating to some of our vessels.

The decrease in adjusted EBITDA is mainly attributable to the lower time charter equivalent rate achieved in the quarter compared to last year and a $13.7 million gain from the repurchase of our bonds in Q4 of 2019.

In Q4 of 2020, we also had a lower contribution from our investment in Navios South American Logistics and our affiliates mainly due to NNA.

Adjusted net loss for the quarter was $20.5 million compared to adjusted net income of $19.4 million in 2019. The decrease is mainly due to the decrease in adjusted EBITDA and a $4.6 million increase in interest expense.

Turning to the full year results. Adjusted EBITDA for the period was $153.4 million compared to $273.9 million in 2019. 2020 EBITDA and net loss were adjusted to exclude $88.4 million impairment losses relating to dry bulk vessels; $13.4 million impairment loss relating to our investment in Navios Acquisition; $18.3 million impairment loss of our investment in Navios Europe II, both directly and through our affiliates; $4.2 million write-off of deferred finance costs incurred at Navios South American Logistics; and $1.3 million vessel impairment losses incurred in our affiliates.

The decrease in adjusted EBITDA was mainly attributable to the decrease in the TCE rate achieved in the period and a $36.2 million higher gain from the repurchase of our bonds in 2019.

Adjusted net loss for 2020 was $67.5 million compared to adjusted net income of $53.9 million in 2019. The decrease was mainly due to a decrease in EBITDA and a $13.5 million increase in interest expense. The decrease was mitigated by a $10.7 million reduction in D&A expenses.

Moving to Slide 10 and our balance sheet highlights. As of December 31, 2020, the cash balance was about $111 million compared to about $79 million at the end of December 2019.

Senior and ship mortgage notes are about $93 million higher than at 2019 year-end, mainly reflecting the new notes issued at Navios South American Logistics.

Long-term debt decreased by $70 million, mainly due to the repayment of the Navios South American Logistics Term Loan B. Long-term debt decreased further in Q1 of 2021, following the repayment of certain bank facilities of Navios Holdings.

Over the next slides, I will briefly review our affiliates. Please turn to Slide 11. The merger between Navios Partners and Navios Maritime 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 86 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 container ships. The enlarged entity will also benefit from a simplified capital and organizational structure, thereby reducing costs. Following the merger, Navios Holdings owns 12.6% of Navios Partners.

Turning to Slide 12. Navios Holding owns about 29.5% of Navios Acquisition. NNA has a fleet of 51 tankers, including 13 VLCCs and 5 container ships that are held for sale.

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 well into vaccination programs and the travel industry showing signs of revival, the market still remains difficult today.

Now I will turn the call over to Ioannis Karyotis for his review of the Navios South America 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.

As you know from our recent press release, we commenced the process for a potential registered public offering in the United States and the B3 stock exchange 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.

Navios Logistics has transitioned its financial reporting from U.S. GAAP to IFRS starting from the year ended December 31, 2020. As a result, all of this discussion will be in IFRS. Our 2020 adjusted EBITDA was $91.8 million.

Last year, we agreed to transport 1.5 million tons of iron ore per year for Vetorial for a 1-year period and an option to extend for a 6-month period. Due to adverse navigation conditions caused by low water levels in the Hidrovia river system last year, only about 62,000 tons were actually transshipped in 2020. This year, shipments have resumed as navigation conditions improved.

Vale recently notified us that they expect to transship 1.7 million tons of minerals through our port in 2021 compared to approximately 1.2 million tons moved in 2020. Our contract with Vale guarantees a minimum quantity of 4 million tons annually.

We recently loaded the first-ever baby Capesize vessel of 120,000 deadweight tons at the Navios iron ore terminal. Our terminal is the only dedicated independent iron ore transshipment facility in the region. In addition, we are the only facility that is capable of receiving a vessel of that size, providing a significant freight cost advantage over other facilities. Vale's notification, the Vetorial contract and other discussions we are having for logistics services are signs of increasing exports of minerals through the Hidrovia river system. All of these should benefit our port terminal and the barge business overall.

During the first quarter of 2021, our newly built 6 liquid barges commenced their 5-year time charter contracts from which we expect to generate approximately $4.7 million annual EBITDA. In March 2021, we concluded the previously announced acquisition of 3 pushboats and 18 tank barges for $30 million. The transaction includes a contract of affreightment for transportation of a minimum of 1.25 million cubic meters of fuel during a period of up to 5 years. We expect to generate approximately $8 million annual EBITDA from the transaction.

Please turn to Page 14. In 2020, adjusted EBITDA decreased by 13% to $91.8 million from $105.3 million in the same period last year.

2020 port segment adjusted EBITDA decreased by 2% to $69.8 million. The decrease was mainly attributed to lower throughput in the grain terminal due to reduced Uruguayan exports affected by lower Uruguayan soybean production and reduced transshipment of grains mainly from Paraguay and Bolivia because of the difficult navigation caused by the low water levels.

In the barge segment, 2020 adjusted EBITDA was $7.1 million compared to $19.4 million in 2019. The year was adversely affected by the historically low water levels in the Paraguay Rivers, which hampered shipping volumes and navigation.

In our cabotage business, 2020 adjusted EBITDA increased by 2% to $14.9 million from $14.7 million last year, mainly due to more operating days and lower costs.

For 2020, adjusted profit for the year was $15.8 million compared to $32.7 million in 2019. This decrease was mainly attributable to lower operating profit and $7.7 million higher finance costs, mainly due to the new senior notes.

Please turn to Slide 15. Navios Logistics has a strong balance sheet with no significant maturities until 2025. Cash and cash equivalents at the end of 2020 were $74.9 million compared to $45.6 million at the end of 2019.

Net debt-to-book capitalization was 56%.

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

Thank you, Ioannis. Please turn to Slide 16. Slide 16 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 0 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 a 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 committee that oversees our management and operations.

Please turn to Slide 17. Slide 17 presents our diversified dry bulk fleet consisting of 45 dry bulk vessels totaling 5 million deadweight, 16 Capes, 23 Panamaxes, 4 Supramaxes and 2 Handysize. We continue to be one of the largest U.S.-listed dry bulk fleets established over 65 years ago. The average age of the fleet is 8.2 years, 23% younger than the industry average.

Navios Group total fleet of 190 vessels, including 95 dry bulk vessels, 54 tankers and 41 container vessels. Navios is a highly diversified public shipping group.

Please turn to Slide 19. With the help of the strong second half 2020 ended the year with the BDI averaging $1,066. Today, the BDI stands at $2,472 with year-to-date average up about 200% compared to the same period last year. Pent-up demand and restocking propelled counter-seasonal exports, which led to the strongest Q1 for sub-Cape rates since 2010.

The recent strength in Cape rates can be partially attributed to increased iron ore exports out of Brazil and surging world trade, driven by strong demand for both major and minable commodities.

Governments, having put in place emergency monetary and fiscal plans to support their economies, have kickstarted a faster-than-expected recovery in world economy. This has led to the IMF to increase its 2021 GDP growth projection to 6%, the highest in 50 years, led by 8.6% expansion in China, India and developing Asia. 2021 dry bulk trade is projected to increase by 3.3%.

Turning to Slide 20. Demand is forecast to outpace net fleet growth in both '21 and '22. 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 3.3% compared to 2020. If you look at the graph on the right, net fleet growth is forecast to be 2.6% this year. Net fleet growth is expected to remain low over the next few years as the order book is the lowest on record.

Turning to Slide 21. Despite the pandemic, China set another yearly record for iron ore imports in 2020 at about 1.15 billion tons, which is an increase of 9.4% over 2019. Chinese steel production surpassed the 1 billion ton mark in 2020.

Global iron ore demand is expected to increase by 2.7% this year, and additional availability of iron ore shipments to China are expected to increase as steel mills replenish stockpiles, driving demand for Capesize vessels.

Forecasts are also for growth in iron ore imports around the world as the effects of the pandemic recede. Europe's imports are expected to grow by 17% in 2021 and Asia, excluding China, is expected to import 12% more iron ore in 2021 than in 2020.

Let's turn to Slide 22. Asian coal imports, which account for over 80% of world seaborne coal trade, are expected to increase by 4% in 2021 following a decline of 6.5% in 2020. The 2020 decrease is mainly attributed to India and Chinese imports declining by 11% and 8%, respectively. In 2020, Vietnam and other Southeast Asian countries accounted for 15% of total Asian imports and are expected to increase imports by 8% this year.

Turning to Slide 23. Worldwide grain trade has been growing at 5% CAGR since 2008, mainly driven by Asian demand, which increased by 14.3% in 2020 and is expected to increase by a further 2.9% in 2021. Overall, total world grain trade increased by 7% in 2020 and is expected to increase by about 2.2% in 2021. An ever-increasing world population, food security issues driven by the pandemic as well as increasing protein demand worldwide continues to support the global grain trade.

World grain production this year will reach a record according to the International Grain Council and the USDA.

Please turn to Slide 24. The current order book stands at a record low of 5.4% of the fleet. Newbuilding contracting was down 49% in 2020 as compared to 2019. Through April 19, contracting is again down by about 33% compared to the same period last year. Accordingly, 2021 net fleet growth is expected at 2.6% and only 0.9% for 2022.

Turning to Slide 25. Vessels over 20 years are about 7.5% of the total world fleet, which compares favorably with the previously mentioned record low order book.

Scrapping totaled 15.8 million tons in 2020, almost double of 2019 total. Year-to-date scrapping has totaled 4.3 million tons, which is on pace for about 14 million tons to be scrapped this year.

In conclusion, positive demand fundamentals, mainly due to the restarted economic activity around the world, along with reduced fleet availability, have continued to support the dry bulk industry in its continuing effort to navigate through the 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 open the call to questions.

(Operator Instructions) And at this time, I'd like to turn the floor back over to Angeliki Frangou for any closing remarks.

Thank you. This completes our Q4 results. IMF is estimating a strong world growth of about 6%, which is going to be very beneficial to commodities, iron ore and grain, as well as the dry bulk. With a 52% open and index days, this provides us a lot of exposure to the market -- to the spot market, and we will enjoy market upside for 2021. Thank you. This completes our presentation.

Thank you. This does conclude today's conference call. You may now disconnect.