Navios Maritime Holdings Inc (NM) 2020 Q3 法說會逐字稿

Thank you for joining us for Navios Maritime Holdings' Third Quarter 2020 Earnings Conference Call. With us today from the company are Chairman and CEO, Angeliki Frangou; Chief Financial Officer, Mr. Georgios Achniotis; Vice Chairman, Mr. Ted Petrone; and Senior Vice President of the Strategic Plan, Mr. Ioannis Karyotis. 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.navios.com. You will see the webcast link in the middle of the page, and a copy of the presentation referencing 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 forwards. 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. Given the difficulties associated with the pandemic, I am pleased with the results for the third quarter of 2020.

During the third quarter, Navios Holdings reported revenue of $126.2 million, adjusted EBITDA of $60.2 million and adjusted net income of $2.1 million. Although dry bulk demand in the first half of 2020 was affected by global shutdowns, fiscal stimulus and other policy measures helped global economies rebound in Q3 and continue to rebound for Q4. We believe that this improvement is attributable to food security considerations and new purchasing patterns in the pandemic economy. Consequently, we are optimistic about the expected growth in demand throughout Q4 and 2021.

Please turn to Slide 4. As you can see, Navios Logistics continue to grow its port business, developing critical infrastructure for transshipping minerals and grains. The company surpassed $100 million in EBITDA for 2019 and more recently, in July 2020, successfully refinanced in senior notes due in 2022 and Term Loan B during 2021 with a new -- $500 million senior secured notes issuance.

In August 2020, Navios Logistics commenced a process for a potential public offering of Brazilian depository receipts backed by common shares on the B3 Exchange in Brazil. Any such offering will be subject to market and other considerations. Navios Partners has about $465 million in contracted revenue and low leverage. Navios Containers, our container entity also has conservative leverage with a 53.9% net debt to book capitalization as of Q3.

Navios Acquisition, our tanker company has benefited through robust market fundamentals, earning about $73 million in adjusted EBITDA for the second quarter of 2020 and has a pipeline of about $480 million long-term contracted revenue.

Slide 5 details the pandemic's impact on global trade. Obviously, GDP for the first half of 2020 was weak given the global shutdown. However, the economic outlook for 2021 is favorable, where IMF expects global GDP to grow by 5.2%, led mainly by China with an expected GDP growth of 8.2% next year. As a result of the disruption to economic activity, during the first half of 2020, dry bulk trade is expected to contract by 2.7% in 2020. However, as economies continue to recover, dry bulk trade is projected to increase by 3.9% in 2021.

Slide 6 highlights our recent developments. During Q3, we achieved an average time charter rate per day of $20,025 per day for our Capesize vessels, $12,093 for our Panamax vessel and $8,836 for our Ultra-Handymax vessels. We have been renewing and expanding our own fleet over the last 12 months. We added 8 vessels to our fleet. 4 vessels were acquired for $96.7 million and 4 newbuilts were added as bareboat charters. Additionally, we sold 7 vessels for $88.7 million in sales proceeds, 4 of which were sold in Q3 for $65.1 million. Through this transaction, we successfully increased our fleet capacity by 8% and reduced its average age by 13%.

As an update to our bond maturities, we have engaged in a collaborative discussion with the holders of our $305 million, 11.25% senior secured notes that are due in August 2022. Owners holding a majority of the principal amount of notes outstanding have agreed to waive the springing maturity subject to an IPO of Navios Logistics to be completed by September 2021.

Slide 7 further details our owned fleet renewal and expansion. As previously mentioned, over the last 12 months, we added 8 vessels to our fleet with an average age of 4.1 years, while we sold 7 vessels with an average age of 13.4 years. This reduced our fleet average age by 13% from 10.7 years in Q3 of 2019 to 9.3 years in Q3 of 2020. Additionally, we were also able to expand our fleet's capacity by 8% from 3.4 million deadweight tons in Q3 of 2019 to 3.7 million deadweight tons in Q3 of 2020.

Slide 8 highlights our liquidity position. As of September 30, 2020, our net debt to book capitalization was 88.9%, and we have cash of $119.3 million. We have no significant committed shipping growth CapEx.

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

Thank you, Angeliki. Please turn to Slide 9 for a review of the Navios Holdings' financial highlights for Q3 and the 9 months to September 30, 2020.

Adjusted EBITDA for the quarter was $60.2 million compared to $89.9 million in Q3 of 2019. EBITDA and net loss for the third quarter were adjusted to exclude $7.7 million net loss from the sale of 2 vessels, $4.2 million write-off of deferred finance costs at Navios South American Logistics due to the refinancing of its bond and $300,000 impairment incurred in Navios Partners from the sale of one of its vessels.

EBITDA and net loss for the third quarter of 2019 were adjusted to exclude $69.8 million due to the deconsolidation of Navios Containers, including $8.1 million of the NMCI EBITDA consolidated in the financial statements of Navios Holdings; $10.6 million impairment of intangible assets in Navios Acquisition; and $1.7 million loss on the sale of the vessel.

The decrease in adjusted EBITDA is mainly attributable to the lower TCE rate achieved in the quarter compared to the last year, and a $12.4 million gain from the repurchase of our bonds in 2019.

What is note worthy and reflects the recovery of the market compared to the first half of the year, when the global economy was affected by the pandemic is that the adjusted EBITDA of Q3 is higher than the adjusted EBITDA over the first 6 months of the year. Adjusted net income for the quarter was $2.1 million compared to $35.6 million in 2019. The decrease is mainly due to the decrease in adjusted EBITDA and a $6.9 million increase in interest expense.

Turning to the 9-month results. Adjusted EBITDA for the period was $116.1 million, compared to $199.2 million in 2019. In addition to the items that affected the Q3 results, EBITDA and net loss were adjusted to exclude $20.2 million impairment loss from the sale of 4 additional vessels and $18.3 million impairment loss of our investment in Navios Europe II, both directly and through Navios Acquisition and Navios Partners.

The decrease in adjusted EBITDA was mainly attributable to the decrease in the TCE rate achieved in the period and a $22.5 million higher gain from the repurchase of our bonds in 2019. Adjusted net loss for the first 9 months of 2020 was $46.7 million compared to an adjusted net income of $34.5 million in 2019. The decrease was mainly due to the decrease in EBITDA and an $8.9 million increase in interest expense.

Moving to Slide 10 and our balance sheet highlights. As of September 30, 2020, the cash balance was about $119 million, compared to about $79 million at the end of December 2019. Senior and ship mortgage notes are about $91 million higher than at year-end, mainly reflecting the new notes issued at Navios South American Logistics. Long-term debt decreased by $73.7 million, mainly due to the repayment of Navios South American Logistics Term Loan B.

Over the next slides, I will briefly review our affiliates. Please turn to Slide 11. Navios Holdings owns 18% of Navios Partners. Navios Partners controls a fleet of 55 vessels, 45 dry bulk and 10 containerships. NMM also owns about 36% of Navios Containers. Since 2008, we received about $200 million in dividends from NMM.

Turning to Slide 12. Navios Holdings owns about 29.5% of Navios Acquisition. NNA has a fleet of 47 tankers, including 14 VLCCs and following the dissolution of Navios Europe II, 7 container ships that are held for sale. Since 2011, we received about $99 million in dividends from NNA.

Moving to Slide 13. Navios Holdings owns about 4% of Navios Containers. NMCI has a fleet of 29 container ships. The company was established in early 2017 to leverage the weakness in the containership sector and scaled up its fleet quickly and efficiently. Since December of 2018, Navios Containers shares have been trading on the NASDAQ Global Select Market.

Now I will turn the call over to Ioannis Karyotis for his review of the Navios South American Logistics results. Ioannis?

Thank you, George. Slide 14 provides an overview of Navios Logistics. 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 adjusted EBITDA for the last 12 months was $97.3 million, about 3/4 of which was generated from the port segment. In August, we commenced the process for a potential public offering on the B3 stock exchange in Brazil, subject to market conditions and other factors.

Last quarter, 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. Vale recently notified us that they expect to transship 2.7 million tons of minerals through our port in 2021 compared to approximately 1.2 million tons expected for 2020. As you may know, our contract with Vale guarantees a minimum quantity of 4 million tons annually. However, Vale's notification, the Vetorial contract and other inquiries we are receiving 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.

In September, we announced the acquisition of 3 pushboats and 18 tank barges for $30 million. The transaction includes a contract of affreightment for transporting a minimum of 1.25 million cubic meters of QL during the period of up to 5 years. We expect to generate approximately $8 million of annual EBITDA from the transaction. The acquisition will be funded with $15 million equity to be paid at closing and sellers financing of $15 million, bearing interest at a fixed rate of 5% per annum. We expect to close the transaction in the fourth quarter of 2020, subject to customary closing procedures.

Please turn to Page 15. In the third quarter of 2020, EBITDA decreased by 13% to $28.3 million from $32.5 million in the same period last year and is adjusted to exclude a noncash loss on debt extinguishment of $4.2 million, stemming from the write-off of unamortized deferred financing costs related to the refinancing of our 2021 and 2022 maturities, with the issuance in July of the new senior secured notes due in 2025.

Q3 2020 port segment adjusted EBITDA increased by 5% to $21.7 million. The increase was mainly attributed to higher revenue in the iron ore terminal and income recorded from a certain claim with a customer in the grain terminal.

In the barge segment, Q3 2020 adjusted EBITDA decreased to $2.1 million from $6.7 million in the same period last year, mainly because of lower revenue from time charter contracts and increased time charter, voyage and operating expenses. The performance of the barge business this year has been affected by extraordinary low water levels in the Hidrovia river system.

In our cabotage business, Q3 2020 adjusted EBITDA decreased by 12% to $4.5 million from $5.2 million last year, mainly due to fewer operating days and lower time charter rates.

For Q3 2020, net income adjusted for the noncash loss on debt extinguishment was $6.8 million compared to $14.3 million in the same period last year. This decrease was mainly attributable to lower operating profit and $4.7 million higher interest expenses and finance costs due to the new senior notes.

Turning to the financial results for the 9-month period ending September 30, 2020. Revenue decreased 3%, adjusted EBITDA decreased 8% to $77.5 million, and adjusted net income decreased 12% to $25.9 million from $29.3 million in the same period last year.

Please turn to Slide 16. Navios Logistics had a strong balance sheet with no significant maturities until 2025. Cash and cash equivalents at the end of the third quarter were $84 million compared to $45.6 million at the end of 2019. Net debt to book capitalization was 54%.

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

Thank you, Ioannis.

Please turn to Slide 17. Slide 17 presents our diversified dry bulk fleet, consisting of 49 dry bulk vessels, totaling 5.3 million deadweight, 16 Capes, 26 Panamaxes, 5 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 years, 23% younger than the industry average. Navios Group's total fleet of 195 vessels include 94 dry bulk vessels, 55 tankers and 46 container vessels. Navios is a highly diversified public shipping company.

Please turn to Slide 19. Q3 saw a jump in the BDI, with a quarterly average settling close to double Q2 at $1,522. The quarter started with 9 months high for the BDI in July, but saw a softening in August. Seasonality returned as the BDI reached the year-to-date high on October 6 at 2,097 led by Atlantic iron ore and grain exports -- primarily to China, before correcting over the last several weeks down to just over 1,100, its lowest point since mid-June. However, the Chinese economy, which accounts for approximately 40% of global dry bulk trade, continued to grow on the back of government stimulus, particularly aimed at infrastructure spending. China, according to the IMF, will be the only major economy to grow this year at 1.9%, with further growth of 8.2% expected in 2021. With the entire globe continuing to be affected by the pandemic, the IMF projected global GDP contraction at 4.4% for 2020, led by a 5.8% contraction in advanced economies. Governments have put in place unprecedented emergency monitoring fiscal plan to support their economies. In light of this, the IMF projects 5.2% global growth in 2021. The most recent 2020 forecast for dry bulk trade is a contraction of 2.7% growth and growth of 3.9% in 2021.

Turning to Slide 20. 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 outpace 2020. This increase is led by coal, which is expected to grow by about 4.7% or 55 million tons.

If you look at the graph on the right, net fleet growth is forecasted to be 3.4% this year and only 1.3% in 2021. Net fleet growth is expected to remain low over the next few years as the order book is currently the lowest on record at 6.2% of the fleet, which is less than 6.4% of the fleet that are scrapping candidates.

Turning to Slide 21. Despite this pandemic, Chinese iron ore imports are expected to increase by 7.4% in 2020 to 1.125 billion tons. Chinese steel mills have reduced their iron ore stockpile by about 30 million tons between June of 2018 and November of this year. China has set a monthly record for iron ore imports in July at about 110 million tons, with the second highest imports coming in September at 106 million tons, as steel production continues to set new records. With the additional availability of iron ore Q4 shipments from Brazil and Australia to China are expected to match Q3 levels as steel mills replenish stockpiles, driving demand for Capesize vessels. The Chinese fiscal stimulus and infrastructure spending should support steel production and, in turn, dry bulk trade going forward.

Moving to Slide 22. The combination of the pandemic and the significant drop in the price of oil and gas has resulted in reduced coal trade. Asian coal imports, which account for over 80% of the world's seaborne trade, are expected to decrease in 2020 by about 6.5%, but increase by 4.4% in 2021. This reduction has added pressure on the smaller vessels, which has been partially offset by increased demand for grains discussed on the following slide.

Turning to Slide 23. Worldwide grain trade has been growing by approximately 5% CAGR since 2008, mainly driven by Asian demand. Overall, Asian grain imports are forecast to increase by 9.4% in 2020, and a further 3.3% in 2021. An ever-increasing world population food security issues driven by the pandemic as well as increasing protein demand worldwide continue to support the global grain trade. With the pandemic disruptions causing minimal grain trade disruptions, the International Grain Council projects record shipments of wheat corn soybeans for the crop year.

Please turn to Slide 24. The current order book stands at only 6.2% of the fleet, which is the lowest on record. New building contracting has collapsed and year-to-date is down by about 60% compared to 2019. With the order book being front-loaded this year and scrapping expected to accelerate as the phaseout of the Vale VLOC fleet, net fleet growth is expected to remain low at about 3.4% for 2020. And only 1.3% in 2021.

Turning to Slide 25. Vessels over 20 years of age are about 6.4% of the total fleet, which is now a higher percentage than the previously mentioned record-low order book. Scrapping, which started slowly due to the combination of the pandemic lockdown and logistical crude challenges now stands at 13.6 million tons year-to-date. This amount is 70% higher than the full year of 2019 and is about 1.5% of the fleet.

In conclusion, positive demand fundamentals due to the restart of economic activity around the world, along with reduced fleet availability caused by the Vale phaseout of its VLOC fleet should provide support to the dry bulk market in this continuing effort to navigate through the 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 of our Q3 results. We open the call to questions.

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

Thank you. This completes our Q3 results, a quarter with more profitability than the first half of the year. And as we are going into 2020, we see good momentum. We have one of the lowest order book in the dry bulk history. There's a strong demand for commodities and the recently announced positive developments on the vaccine should further accelerate the growth next year. Thank you. This completes our quarterly results.

Thank you, ladies and gentlemen. This does conclude today's conference call. You may now disconnect.