Navios Maritime Holdings Inc (NM) 2007 Q2 法說會逐字稿

At this time, I would like to welcome everyone to the Navios Maritime Holdings' second-quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (OPERATOR INSTRUCTIONS)

Thank you. It is now my pleasure to turn the floor over to your host, Mr. Tom Rozycki. Sir, you may begin your conference.

Thank you for joining us for this morning's call. With us today from Navios Maritime Holdings are Ms. Angeliki Frangou, Chairman and CEO; Mr. George Achniotis, Chief Financial Officer; and Mr. Michael McClure, Senior Vice President - Corporate Affairs.

As a reminder, this conference call is also being webcast. To access the webcast, please refer to the press release for the Web address, which will direct you to the registration page.

Before I review the structure of this morning's call, I would like to read 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. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are based upon the current belief and expectations of Navios's 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's filings with the Securities and Exchange Commission. The information set forth herein should be understood in light of such risks. Navios does not assume any obligation to update the information contained in this conference call or the accompanying slide presentation. Thank you.

At this time, I would like to provide an outline for today's call. First, Ms. Frangou will provide a business review. Next, Mr. McClure will give an operations update and an overview of market fundamentals. Following Mr. McClure's remarks, Mr. Achniotis will briefly review Navios's second-quarter 2007 financial results. Finally, Ms. Frangou will offer concluding remarks.

After the completion of the remarks from the Company, we will open the call to take your questions. At this time, I would like to turn the call over to Ms. Angeliki Frangou, Chairman and CEO of Navios Maritime Holdings. Ms. Frangou?

Thank you, Tom, and good morning. Thanks to all of you for joining us on today's call. Before I turn to the presentation, I would like to note that Mr. Ted Petrone will not be on today's call as he is recovering from a minor surgery. We wish Ted a quick and complete recovery and look forward to him joining us on our next call. As Tom mentioned, Mike McClure is here and will provide our outlook on the industry.

Now turning to the presentation, I am very pleased with our overall performance for the second quarter of 2007. As you can see on page 5 of our presentation, during the quarter we delivered very strong financial performance. We grew EBITDA by 74%, net income by over 370%, and revenues over 156% as compared to the same period in 2006. In particular, EBITDA grew to $42.6 million from $24.5 million; and net income grew to $23.2 million from $4.9 million.

This financial growth is a product of our prudent management and robust industry fundamentals, which Mike will discuss shortly. Maintaining our industry leadership requires a good flow, a sound balance sheet, and prudence in managing risk. We devote a significant amount of time in considering these matters and judge our performance based on how well we manage these affairs.

Now, let's turn to page 6. The chartering market has been very healthy, and we have been extremely active in this. We recently announced eight long-term charter-out contracts with an average duration of over five years and an average rate of $24,338 net of any commissions. These figures compare very favorably to the contracts we announced in the first quarter, when Navios chartered out seven vessels with an average period of two and a half years and an average rate of $26,000. (inaudible) we have more than doubled the term of the average contract while keeping the average rate about the same.

We believe that our brand-name allows us to take advantage of the current strong rate environment. We have been able to enjoy premium signatures on long-term charters that represent in aggregate 41 years (inaudible) [employment] and approximately over $361 million of contract revenue. Of note, one of our contracts was for 10 years term, which is rare in our industry. Navios's brand continues to be a differentiator in our industry.

The impact of these new charters on our fleet is very significant. As a result of these contracts we have increased our average daily rate for the entire active fleet by approximately $1,400 per day per vessel, to approximately $24,600 per day per vessel for the periods 2008 and 2009.

This secure cash flow allows us to comfortably pursue growth while enjoying protection against any down-cycle activity. The industry continues to be very healthy. We believe that in this environment Navios can continue to expand its business and its fleet.

The secure cash flow also promotes structural flexibility. Navios can continue to review its business model in light of market conditions and refine its model as necessary to take maximum advantage of opportunities (inaudible).

I would like to address now for a moment Navios's Capesize segment. In the first quarter of 2007 Navios entered the Capesize segment by acquiring Kleimar. In addition, we recently announced the acquisition of four Capesize vessels, being built a South Korean first-class shipyard for an aggregate price of $460 million, with delivery in 2009.

For the first two vessels, we have agreed to pay $120 million for each one, with delivery June and September of 2009. We have paid $48 million in the quarter for the two vessels, and we will pay $192 million, the balance, on delivery of the vessels in 2009. For the two remaining vessels to be delivered in the fourth quarter of 2009, we entered into conditional agreements to acquire each vessel for $110 million. We expect the contingencies to resolve over the next couple quarters or the next couple of months, at which point, the contracts will be firm.

As (inaudible) of these transactions, we now have 12 Capesize vessels, of which seven are charter-in and five we own. We also expect to exercise the purchase option on the two vessels for delivery in the first half of 2008. With this, we will bring the total owned Capesize fleet to seven vessels.

Recently, Navios took delivery also of the following three new building vessels under long-term charter-in arrangements. On May 9, we took delivery of the Navios Primavera, a 2007-built Ultra Handymax vessel; and on June 19, the Navios Prosperity, a 2007-built Panamax vessel. Both of these vessels have purchase options for Navios. Also, on August 9 we took delivery of the Navios Esperanza, a 2007-built Panamax.

In April, Navios purchased for $26 million the remaining 50% of the Navios Asteriks that we didn't own, a 2005 Panamax. The vessel's values have improved significantly from the time of this acquisition.

Now, turning to slide 7, we also devoted time in this quarter to broaden our equity and shareholder base. In the second quarter of 2007, we completed a secondary offering, in which we raised $132.2 million of gross proceeds. We are very pleased that we were able to sell our shares at more than 10% premium to the sale price on the date that we announced the Road Show.

We also had some pleasant surprises from the volume of unsolicited warrant exercises. Today, approximately 5.3 million of these warrants have been exercised; and we received approximately $26.6 million.

Turning to page 8, dividends. We have maintained our commitment to provide a [quarterly] return to our shareholders. Based on our results of operations, we declared a dividend of $0.0666 per share for the second quarter of 2007 to holders of record on August 31, with payment on September 14, 2007. This will be the seventh consecutive dividend payment.

At this point, I would like to turn the call to Mr. Mike McClure, who will take you through the industry update. Mike?

Thank you, Angeliki. As shown on slide 10, during this past quarter the Baltic Exchange Dry Index hit a then-new high during the second quarter, breaking the prior high established back in Q4 of 2004. The market dipped in the middle of the second quarter, but was followed by relentless strength, to where the BDI stands at its new record territory here in mid-August. On a year-to-date basis, the BDI has gained over 48%, reflecting the strength of the macroeconomic climate supportive of industrial growth and world seaborne trade.

Turning to slide 11, you'll see that the Company's average daily charter-out rate, after the series of vessel fixtures announced earlier this week and discussed by Angeliki. The average contractual daily charter-out rate for the core fleet, excluding Kleimar vessels, is $21,504 for 2007 and exceeds $24,000 a day for 2008 through 2010.

This reflects Navios contracting out 99% of available base in 2007; 88.9% in 2008; 49.6% in 2009; and 29% in 2010. Contracted revenues are now $220 million in 2007 and $250 million in 2008, as shown on the chart on the middle right. Our long-term charter-out contracts yield secure future cash flows and earnings visibility.

Turning to the bottom of the slide, it is important to note that over 78% of the contracted charter-out revenue from 2007 through 2010 is with 10 counterparties of world-renowned reputation and of the highest credit quality. It is the Company's credit policy to fix our vessels to well-established, well-known counterparties.

Moving to slide 12, entitled Fleet Growth Through In the Money Purchase Options. Navios's long-term charter-in strategy has been successful in obtaining many purchase options on new, long-term charter-in vessels. This gives the ability to acquire new buildings without capital outlay during construction.

To date, Navios has taken ownership of eight vessels through exercise of purchase options, as shown on the left side of the slide, increasing its net asset value by over $326 million as the average vessel market price of $60.4 million exceeds the average purchase cost by $48.8 million per vessel.

It is Navios's intention to exercise four additional purchase options for ownership, effective during the first half of 2008. As shown on the right side of this chart, exercise of the purchase options on the two Capesize vessels acquired through the Kleimar acquisition will increase net asset value by about $179 million. Similarly, two Panamax vessels will generate about $101 million. In total, the acquisition of these four vessels will increase net asset value by $280 million, based on current market values.

Turning now to the industry overview section and the slide on favorable demand dynamics, slide number 14. Emerging countries now contribute over half of the world GDP, and they are expected to grow at a sustainable rate of 6.1% for the next five years. Industrial production is a key driver and indicator of drybulk trade growth. China and India continue to expand their economies and have maintained rapid industrial production growth. Many European countries, as well as other Asian countries, have sizable industrial production growth rates.

China and steel are increasingly becoming synonymous. Today, China accounts for 36% of world steel production, up from only 10% 16 years ago. Chinese crude steel output in the first half of the year reached 238 million metric tons, up 18.9% year-on-year. Reported crude steel production in June was 42.1 million metric tons, an annualized rate of 511 million.

It looks likely that total production for 2007 will be close to 500 million metric tons, compared to 425 million in 2006 -- substantially higher than many analysts had predicted earlier this year. According to my steel survey, crude steel capacity will keep growing to about 700 million tonnes by 2010, suggesting a compound growth rate of 7.7%.

China's iron ore imports are up 16.4% June year to date. With estimated July imports at 33.6 million tonnes, their annual import is expected to approach 400 million tonnes for all of 2007. This would be an increase of over 22% on 2006 imports of 326 million tonnes.

The rate of growth in iron ore shipments will continue to be determined by the availability of fresh supply. The major three producers, Rio Tinto, CVRD, and BHP, have committed to substantial increases in mining plans. In addition, new iron ore companies like FMG in Australia is bringing on 45 million metric tons per annum next year. Not shown are CSN and MMX of Brazil, who are targeting export growth of over 60 million metric tons per annum by 2010.

This demonstrates that by year 2010-2011, there will be at least a doubling of available iron ore for export to the world markets providing the raw material requirements of China and others that hunger for crude steel.

China, the world's largest coal producer, has become a net importer, from the world's second-largest exporter. In shipping terms, this has not only created outright demand growth in China, but has increased the ton-mile load for other major Far Eastern buyers, who have been forced to change import sources from China to Australia, Canada, and South Africa as well as the more proximate suppliers in Indonesia and Vietnam.

Overall, volumes of global coal trade have not shown any substantial increases thus far in 2007. Clarkson is estimating only a 1% increase in steam coal trade over 2006. However, on a longer-term outlook, the coal trade is foreseen as an additional driver in the freight market. It is estimated that there is currently 115 gigawatt of coal-burning electricity generating capacity to be built, requiring 400 million metric tons of coal per annum. China is forecast to build 500 coal-fired power plants in the next decade.

In summary, demand increases for iron ore and coal will continue to provide the driving force behind the freight market.

On slide 15, the world dry cargo trade from 1980 through 2006 is shown. Note that for the first 10 years, from 1980, trade growth in terms of millions of tons increased an average of 2.1%. The next 10 years showed a slight increase to 2.5%. However, around the time China was admitted to the World Trade Organization in 2000, growth doubled to an average of 5.1% per year. We believe that India will provide future upside to this cargo trade growth.

It is important to point out that a 5.1% cargo growth rate is not directly comparable to fleet growth, as export tonnage does not take into consideration changing trade patterns, China's coastal trading, and port congestion, all of which absorb supply.

Turning to slide 16, in our Q1 earnings call we highlighted the major impact of China's coastal trading. Coal is their most significant commodity in terms of coastal shipments. Their coal production volumes continue to trend up. Given the government's priority to shift freight from an overburdened rail and road system, as well as the ongoing program to build new coal-powered electricity plants on the seaboard, it is reasonable to conclude that the great majority of the production increases, as well as the cargo now being diverted from export to domestic markets, will be transported by sea.

It is estimated that Chinese coastal trade will grow at least by the rate of GDP growth. At 10% growth, coastal trade in the second half of 2007 would increase by 30 million tons more. This is substantiated by the fact that a new port terminal opened in April with handling capacity of 75 million tons per year, and other considerable investments are taking place in Chinese port facilities.

Viewing the next slide, number 17, the order book now includes 148.4 million deadweight or 39% of the existing fleet. Vessels are scheduled for delivery out through 2011 and beyond. New vessels ordered today will not be delivered until 2010 and perhaps 2011.

Generally, the dry-bulk order book reflects construction contracts on vessels from existing yards and is only variable in terms of specific delivery dates. However, currently we find that the Capesize order book includes orders from yards that either do not exist today or yards which are not experienced in large dry-bulk vessel construction.

The Capesize order book is spread among 28 yards of which only 11 have ever actually delivered a Capesize vessel. SSY estimates that this is the case for over 90 Capesize ships.

Given strong market conditions, older vessels are not being scrapped. About 14% of the fleet is over 25 years of age, the average usual economic life of a vessel. If this situation continues until 2010, Howe Robinson estimates that 2,130 vessels of 90 million deadweight will be over 25 years of age. This includes 99 Capes of 15.6 million deadweight. Of this number, 819 ships of 26 million deadweight will be 30 years old or more.

In conclusion, since 2003 dry-bulk growth has become much more aligned with the growth rate of major emerging economies, principally China, and has been running closer to 8% per year. Surplus vessel capacity has been used up, and demand for shipping exceeds available supply. Demand forecast and new supply for raw materials point to a continued strong and sustainable freight rate environment.

At this time, I would like to turn the call over to George Achniotis to review the second-quarter's financial results. George?

Thank you, Mike. I will now briefly review Navios's financial results for the second quarter and the first half of '07. The financial statements that I am about to discuss were included in this morning's press release and are summarized in the slide presentation on the Company's website.

As shown on slide 19, total revenue for the three months of operations ended June 30, '07, increased by 156% to $136 million as compared to $53 million for the comparable period of '06. Included in revenues, the port terminals, which contributed $3.4 million versus $2.9 million in the second quarter of '06.

Revenue from vessel operations for the three months ended June 30, '07, improved by 164% to $132.5 million as compared to $50 million for the same period during '06. The increase in revenues mainly acceptable to the increase in operating days by more than 1,500 days. An improvement in the market. The average time charter equivalent rate including FFAs for the quarter was $23,909 per day; and that is $6,580 per day higher than the rate achieved in the same period last year. And an increase in the number of COAs serviced by Navios, which were acquired as part of the acquisition of Kleimar.

EBITDA for the second quarter of '07 increased by 74% or $18.1 million to $42.6 million as compared to $24.5 million for the same period of '06. The increase is mainly attributable to the increase in revenues by $82.9 million between the second quarter of '07 compared to the same period of '06; and again in FFA trading of $7.2 million in the second quarter of '07 versus a gain of $1.7 million in the same period in '06, resulting in a favorable FFA variance of $5.5 million.

The above increase was mitigated mainly by, first, the increase in time charter and voyage expenses by $57.6 million from $22.6 million in the second quarter of '06 to $90.2 million in the same period of '07. Second, the increase in the direct vessel expenses by $2.8 million due to the expansion of Navios core fleet from 15 vessels in the second quarter of '06 to 19 vessels in the same period of '07.

Third, the increase in general and admin expenses by $0.6 million. And fourth, the net decrease in all other categories, other income and expenses, income for investments in finance leases, and income from affiliate companies by $0.7 million.

Our EBITDA for the second quarter was adversely affected by $2.3 million due to the accounting treatment of one of the Kleimar Capesize vessels, the Obeliks, which has been accounted for as a capital lease instead of an owned vessel. If the vessel was accounted for as an owned vessel, EBITDA for the quarter would have been $45 million.

Net income for the three months ended June 30, '07, increased by 371% to $23.2 million compared to $4.9 million for the same period in '06. The increase is mainly attributable to the $18.1 million increase in EBITDA.

As mentioned earlier, time charter and voyage expenses increased by $57.6 million in the three-month period ended June 30, '07, compared to the same period in '06. This were primarily due to the high charter-in expenses relating to Capesize vessels and servicing the related COA business following the acquisition of Kleimar.

Direct vessel expenses for the operation of the old fleet increased by $2.9 million to $7.9 million for the three-month period ended June 30, '07, as compared to $5 million for the same period in '06. Direct vessel expenses include crew quarters, provisions, deck and engine stores, lubricating oils, insurance premiums, and maintenance and repairs. The increase resulted primarily from additional costs relating to the increase of the core fleet by four vessels compared to the second quarter of '06.

Turning now to the six-month results highlighted on slide 20, revenue for the six months ended June 30, '07, increased by 131% to $237 million as compared to $102.7 million for the same period in '06. This increase is mainly attributable to the increase in operating days by more than 2,900 days, as well as the improvement in the market resulting in higher charter-out rates and the increase in the number of COAs serviced by Navios acquired as part of the acquisition of Kleimar.

EBITDA for the first half of '07 increased by 57% to $77.2 million from $49.1 million in the same period of '06. This $28.1 million increase in EBITDA is mainly attributable to the increase in revenue by $134.3 million between the first half of '06 compared to the same period of '07, and a gain in FFAs of $10.1 million in the first six months of '07 versus $3.3 million gain in same period last year.

The above increase was mitigated by, first, an increase in time charter and voyage expenses by $107.2 million from $43.4 million in the first half of '06 to $150.6 million in the same period of '07. Second, the increase in direct vessel expenses by $4.8 million due to the expansion of the owned fleet from 15 vessels in the first half of '06 to 19 vessels in the same period of '07. And third, the increase in general and admin expenses by $1.3 million.

As mentioned earlier, EBITDA is adversely affected due to the accounting treatment of one of the Kleimar Capesize vessels, which has been accounted for as a capital lease instead of an owned vessel. If the vessel was accounted for as an owned vessel, EBITDA for the first half of '07 would have been $81 million.

Net income for the six-month period ended June 30, '07, increased by 283% to $38 million compared to $9.9 million for the same period in '06. The increase is primarily due to a $[18.1] million increase in EBITDA.

Turning to the next slide, number 21, I will highlight key balance sheet changes between June 30, '07, and December 31, '06. Navios's cash and cash equivalents balance including restricted cash on June 30, '07, was $243.8 million versus $115.9 million at the end of December 31, '06.

Total assets grew by 70% to $1.6 billion, reflecting primarily the acquisition of Kleimar; the net proceeds of the secondary offering in May; the exercise of warrants; the addition of one vessel into the owned fleet from the long-term charter-in vessels; and the acquisition of the remaining 50% interest in one Panamax vessel whose remaining 50% is held by Kleimar.

The long-term debt including the current [portion] increased to $311 million at quarter ending June 30, '07, versus $270.1 million at the end of December 31, '06, due to the acquisition of Kleimar, the exercise of the option to acquire Navios Hyperion, and the acquisition of the remaining 50% interest in the Panamax vessel referred to before.

Despite the increase in long-term debt, the net debt to book capitalization ratio decreased from 53.7% to 32.3% due to the additional equity raised through the secondary offering, the exercise of warrants, and the cash generated from operations.

This concludes my review of the financials. At this time, I will turn the call back over to Angeliki.

Thank you, George, and now we open the call for questions.

Jonathan Chappell, JPMorgan.

Thank you. Good afternoon. First question surrounds the purchase options that you intend to exercise at the beginning of the next year. Do you intend to keep those ships in your operating fleet? How do you plan to employ them once they are in the fleet? Or do you feel there is an opportunity to sell those assets in the open market, to really lock in the spread of the market value versus your [varying] the money purchase option?

Good morning, Jonathan. Thank you for joining so early in the morning.

No problem.

First of all, we are exercising the option of the Capesize at the end of the year. Now we are going to be freeing it up from the Kleimar Contracts of Affreightment, so that will be releasing some shareholder value on that.

We are trying to find the best way for Navios to really give back to our shareholders the (inaudible) that we have on locking in these long-term charters, [plus] the good values that we have, the capital appreciation we have between the options we have exercised and the market values. So we are entertaining a lot of different ways of how we can [manage] this shareholder value.

Okay, that is actually a very interesting point you just brought up. Both of these purchase option Capes will be released from their Contracts of Affreightment by the end of this year?

First the one [vessel]; and then later in 2008 the second vessel.

Okay, and that is a good lead-in to my second question, which was what about the remaining COA duration for the Capes for Kleimar? When will the rest of those expire, so that you can employ them either on other contracts or the spot market?

This is an ongoing process, where we free up the two vessels with other purchase options, and then we have also locked in some new vessels at we believe is a very -- at very favorable rate, which we can also employ. But this will be 2009 event and onward.

Okay. Then my last question is, your balance sheet is exceptionally strong, potentially even underlevered with the amount of cash that you have. You have just locked in a lot of contracted revenue with really strong counterparties.

How do you look at the opportunities out there for acquisitions versus potentially increasing your dividend to a more substantial payout?

First of all, we believe that this way will give us -- the way we have done 41 years of employment, we have locked in $360 million of revenue. It gives us the possibility of really doing a large acquisition without any even -- without [using] the prudency and the way of conservative way we are. So it gives us a tremendous opportunity for acquisitions.

Second of all, we are looking (inaudible) now we are now as -- we are always looking on a two- to three-year visibility in our earnings. Now we will have a part of our fleet that looks over five years. We are trying to find a way that we can return shareholder value and (inaudible) for the vessels that we have more visibility. And we are entertaining a lot of different structures.

So you are entertaining dividends. And also, given the fact that your stock is well below what I would expect you to believe your net asset value to be, would you look at share buybacks as well as dividends?

We are entertaining accretive acquisitions, first of all. We don't need to issue any new shares with the amount of cash we have generated and the amount we have locked in. We are trying to find ways -- we are not deciding (inaudible) but we can find structural ways that we can return to our shareholders part of this locked-in revenue.

Okay, thank you, Angeliki.

Natasha Boyden of Cantor Fitzgerald.

Good morning. Angeliki, I wonder if I can just go through a few sort of minor issues here. You have given guidance before on the FFAs of around $15 million. You have said -- not guidance, necessarily, but that is what you would like it to be. Does that still stand? Or do you have a new number in place?

We like to say $15 million, because this we not would stress in our (inaudible) on traders or our team. This was a good quarter. It was also the movement in the (inaudible) -- the movement (inaudible) Company to make this profit.

We would not like to raise that. I mean, we like to be on the conservative side. We see that there is no issue of not hitting the numbers next quarter.

Okay, so you think it should move down slightly next quarter; is that what you are getting at? Again?

No, we don't believe that we have -- I mean, we see our Company being in line for hitting its numbers.

Okay, great. Then just on the income taxes, could you just let me know what the change there was? I think you went down from about $1.1 million to $634,000.

Natasha, this were just for taxes from Kleimar.

Okay.

These are differences on the depreciation rate, the tax rate they are taking in Belgium, and the actual depreciation rates we are taking in the books of Kleimar. But it is not tax that is ever going to be paid by Kleimar.

Okay, okay, fair enough. Thank you. Then, I suppose lastly, could you give us some idea or any update on your plans for the port terminal? Is there anything happening there?

We do have a -- we have been working very meticulously this period. We don't have a reportable, a definite agreement. But we have been working on this. We will be looking to use part of the cash we have on the balance sheet for this kind of opportunity.

Okay, great. Well, we will look forward to an announcement on that. Thank you very much.

Jeff Fidacaro of Merrill Lynch.

Good morning. Just quick on the -- going back to the five-year charters that you talked about earlier, that you just renewed. Your earlier target was about two to three years sort of period. Should we think about the '08s, that rollover coming out as more five-year terms? Are you looking longer-term charter? Just give us a little sense of the strategy there.

The strategy of the Company has not changed. We have a two- to three-year outlook, but we have been creating because we find this is a very strong market. We have found counterparties that are exceptional where you can do [really] with industrial, with mineral companies, with -- what you can do now on Panamaxes and Handymaxes five years deals with really credit-worthy counterparties. So we saw the opportunity of locking in very good profit.

This will give us the possibility of -- as you see we did a $550 million expansion, and we haven't done -- we didn't lock any the vessels, because we have the flexibility created by that.

But we see the Company having, in essence we are having [our] fleet. A part of our fleet is with these two to three years, and a part of the fleet that is now extended to over five years. In essence, we are going to -- we are contemplating ways where we can give to the shareholders the maximum return by creating this locked-in revenues.

If you take a look over the next three years, you are having about $0.5 billion worth of revenues locked in, a substantial amount. (inaudible) vessels should be very [happy] also.

When we look at a 2008, there's about four or five vessels rolling over. Have you made any decisions on sort of the time period you are looking at to lock the rest of those in?

We are not looking at this moment on something on these vessels. We have -- we believe we [did] a very successful strategy on the ones we have, the eight vessels. Which gives us, together with the fleet we have, the rest of the fleet employment, gives us a possibility to implement on our strategy.

Then just one sort of modeling question on the warrants outstanding. How many were exercised this quarter? What is going to be the warrant count in third quarter?

We had about 5.3 million warrants exercised. We got $26.6 million in proceeds; and there is a remaining of 12.3.

Great, thank you for your time.

Omar Nokta of Dahlman Rose.

Most of my questions have been answered. I just had a quick one on the two Panamaxes that you expect to exercise next year. Do you know which ones those are and when they're exercisable?

We have Aurora and Orbiter. It is at the usual -- we don't -- it is exactly on the day we are -- we exercise (inaudible) around the $20 million mark.

Actually on slide 12, you have exact amount, $20.7 million. It can fluctuate a little bit depending on the exact day of the delivery. (inaudible) has a de-escalating way and depends on the day you announce by the time you get delivery.

Yes, just wondering, is it midyear, is it early on in '08?

The one is beginning; and the second one is June, by June.

Okay, all right. Thank you. That's all I had.

Tom Nowak of Merrill Lynch.

Yes, actually on that slide, slide 12, I just wanted to confirm. Were there any remaining purchase options for '07?

No, there is not.

Okay. Beyond the Capesize, would you -- sorry?

Meaning that there won't be any vessels delivered from purchase options in '07. We may exercise some of them in '07; but the delivery will be in '08.

Okay. Does that include the four on this slide that you're referencing? On slide 12?

That's correct.

You are exercising in the end of '07, delivery by -- if you take also the [usual] that a vessel can be in a port depending on the schedule they have -- it will be somewhere first quarter of -- it can be from the beginning (inaudible) of the first-quarter '08, and one in the second quarter of '08.

Okay, understood. Besides the Capes announced recently, are there any other purchase options in '09 that you anticipate?

If we anticipate any other accretive deals to do? Yes.

No, I meant of the current vessels that you have purchase options on, in the fleet.

No. We have two purchase options that we are exercising, two Panamaxes that we are exercising the options; and four new Capes that we announced as a deal for 2009 delivery.

Okay. So it works out, based on the information you have provided, about $113 million for vessel purchases in '08 and about $360 million in 2009 for the Capes. What are your initial thoughts on financing?

In essence, we have enough cash and enough financing capacity that we don't need to issue any shares. We are in a very comfortable situation that we also can do further expansion with the cash we are generating.

Okay, great. Great lead-in to my final question, can you provide the current cash balance as of today versus June 30?

No, I'm afraid we cannot provide that. That is not public information.

Okay, great. Thank you very much.

But you can figure out (inaudible).

Tim Tiberio of Oppenheimer.

Thank you and good morning. Just going back to the port operations, the port operations have obviously been growing much quicker than the long-term growth rate that you have provided of 10%. Can you provide us with some insight into I guess what is going on within the operation that is enabling that operation to grow a little bit quicker?

How does this relate to the overall grain trade in South America, and how that is impacting Panamax rates on the current environment?

First of all, if you can speak a little bit louder it would be very good. But if I understand your question, it is about South America and that the numbers are moving higher than we expected.

This is because the whole area has been growing at an amazing pace. From last year, every quarter we have is a higher quarter, a record high. The volumes now seem to be increasing more than anyone had anticipated. We show that also in the shipping side, which had a record growth from South America this year.

Okay, thank you so much.

Urs Dur of Lazard Capital Markets.

To follow up really quickly, most of the questions have been asked, but follow up really quickly on the warrants. How is it going this quarter? Are there more voluntaries this quarter so far that you can mention? Or should we expect a similar pace? Or we just want to stick to the number you have reported?

Urs, we have to the stick to the number we have reported.

Okay, so you can't give us any sort of feeling? All right. I guess the other question is more general on the market, and following up a little bit from Tim's question. I think something that Mike can probably provide some color.

This is a term that comes up all the time in everybody's analysis, is ton-mile demand. But very few people can put a figure on it. I noticed that you don't necessarily either, other than anecdotally we know that ship journeys are going longer and longer and constricting ship supply effectively.

Have you seen any firm numbers on it? What are the -- let's say, can you give me maybe the top three drivers of ton-mile demand today?

Urs, you're right, it is a very hard number to come up, it is a very hard number to predict, and very few companies attempt it. However, what we are seeing is there is just so much changing.

But first of all, with the increased demand for iron ore, some of the Capes are now ballasting back to Brazil; so that is increasing the demand. We are also seeing China importing an additional 10 million tonnes of bauxite this year, and some of that bauxite comes all the way from Guinea. So we are just seeing many trading patterns changing and lengthening overall.

So it is a very difficult number to get a handle on. But it's definitely, with the trading patterns' change, it seems to be a very positive influence on the market.

I don't want to pester you, but just to follow up a little further, is there any -- do you notice it specifically in your fleet in terms of time at sea for what you have on charter and what you have on the water? Is there anything specific you see internally? Or is this still anecdotal as to the entire market that you are seeing?

Well, this is more anecdotal to the entire market. Our vessels are on a time charter basis out, so we don't necessarily control them and put them into cargos. But the entire world fleet is very active, and it's very difficult to follow exactly what parameters are changing here.

I 100% agree; and I do recognize they are on time charter. I'm just trying to -- and I think that is sort of the Holy Grail at this point in time, if somebody can get a number on that. That is very interesting. All right, well, thanks for your time.

This ends our question-and-answer session. I will turn the floor back to your host, Ms. Frangou, for any closing remarks.

Thank you very much, all, and thank you for the questions. Goodbye.

Thank you. This concludes today's Navios Maritime Holdings' second-quarter earnings conference call. You may now disconnect.