Navios Maritime Holdings Inc (NM) 2007 Q4 法說會逐字稿

Good morning and welcome to the Navios Maritime Holdings fourth quarter and year-end 2007 earnings results conference call. All participants will be in a listen-only mode. There will be an opportunity for you to ask questions at the end of today's presentation. Instructions will be given at that time. (OPERATOR INSTRUCTIONS). This conference is being recorded.

I would like to turn the conference over to Tom Rozycki. Sir, you may now begin.

Thank you for joining us for this morning's call. With us today from Navios Maritime Holdings are 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 fact. Such forward-looking statements are based upon the current beliefs and expectations of Navios' management team 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' 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 associated presentation. Thank you.

At this time, I would like to outline the agenda for today's call. First, Ms. Frangou will offer opening remarks. Next, Mr. McClure will provide a brief overview of market fundamentals. Following Mr. McClure's remarks, Mr. Achniotis will briefly review Navios' fourth quarter and year-end 2007 financial results. And finally, Ms. Frangou will offer concluding remarks. At the completion of Ms. Frangou's remarks, the Company 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 Holdings. Angeliki?

Thank you, Tom, and good morning to all of you. I am very pleased with our 2007 operational and financial performance and our continued growth of Navios. Today Navios represented a group of companies controlling [70] (inaudible) vessels and almost 7 million deadweight tons. We have [two in] this capacity over a relative short period of time and in cooperation with our shareholders and investors. With our existing strategic initiatives and the current market conditions and opportunities, we have a continued building of the group during this upcoming year.

I will briefly review the results of our fourth quarter and the full year of 2007. George Achniotis will take you through in much more detail to the financial results in a moment.

As you can see in slide three, the fourth quarter of 2007, Navios holding grew EBITDA by 101% to 49 million. In addition, as you can see in slide four, overall of 2007 Navios holding grew EBITDA by 76% to $191.4 million.

Please note that this is (inaudible) income figures are somewhat lower than the reported numbers for the following reasons -- first, we have excluded [$167.45 million] of gain from the sale of vessels. Second, we have included the $9 million in EBITDA from vessels characterized as financial leases under U.S. GAAP. We have made these adjustments as we feel these figures provide a much better measure for overall performance.

Let's now turn to slide five. We have continued to be optimistic about opportunities within our industry and we expect to participate in future consolidation. We also believe in providing a [current] return to our shareholders. Today, we have positioned to do both. As we enjoy a very stable cash flow from both dividends from Navios [proper] and earnings from our core fleet.

As a result, we have increased our dividend by [35%] with respect to the fourth quarter of 2007 to $0.09 a share. The dividend will be paid on March 18 to shareholders of record on March 10. In addition, we have also announced a share repurchase program under which we will repurchase up to 50 million of common stock depending on market conditions, share price and other factors. [With] this dividend and the establishment of a share repurchase program, should be viewed as a vote of confidence in our future. We can continue to be opportunistic in relation to the market allow returning cash to our investors. Moreover, the purchase of shares in the recently experienced market prices represents an outstanding investment highlighting our belief in the fundamentals of our industry.

Now let us turn to slide seven. We accomplished a great deal in 2007 as we continue the evolution of Navios. In fact, tomorrow will be one-year anniversary since we listed ourselves (inaudible) with the New York Stock Exchange. We have been very pleased to affiliate with this very fine exchange, grown our fleet, (inaudible) grown into a scale has always been our main goal to bring Navios holdings is one of the largest publicly listed worldwide shipping companies.

Owning [25] vessels, controlling [62] and representing 6 million goodwill terms. Our fleet vessel is one of the youngest in our industry with an average age of [4.3] years.

In 2007, we committed to purchase nine [Cape] size vessels. This is an 1.6 million deadweight approximately for $950 million. To fund this, we paid approximately $200 million in deposits in 2007. In 2008, we will have to pay an additional 105 million of which $17 million will be financed from existing lines of credit.

In addition to this expansion, we have also added to our lot -- to our chartering-in fleet, adding 15 vessels, all Japanese or Korean built. All these vessels have purchase options so we have continued to grow our fleet without significant current outlay of funds.

Also, we have solidified the balance sheet during 2007. In May, we were at a $132.2 million in a secondary equity offering. We also raised $119.3 million from the exercise of outstanding warrants. About [71 million] was received in a tender offer.

Since then we have also had about $48 million coming in through our solicited warrant exercises. As of December 31, 2007, Navios had [7.8 million] warrants outstanding and we expect over the course of time to receive an additional [39 million] as these warrants expire in December of 2008.

Let's now turn to slide eight. In 2007, we acquired Kleimar, a Belgium based company that has had an extensive COA business transporting iron ore and coal to China. We think this investment has paid off handsomely. It represents a very conservative entry in the Capesize sector which was always part of our strategic vision.

In addition, we have made our initial investment to the sale of Fantastiks to Navios partners along with increases in value that we have enjoyed in connection to the vessels Beaufiks, [Gabechi] and Asteriks [Panamax]. More recently we also successfully launched two new strategic initiatives. In November of 2007, we listed Navios Partners in the New York Stock Exchange under the symbol [NMN]. As a result of this transaction, Navios Holdings sold eight vessels to Navios Partners, receiving $513 million in total consideration. The (inaudible) Consolidation is composed of three components -- number one, $353.3 million in cash. Number two, a 41.2% subordinate LP interest. And number three, 2% of GP interest. Using a public market proxy of this unit sold in the offering, these (inaudible) represent $153 million as of December 31, 2007. Also, [behind the] cash flow to Navios from this (inaudible) is anticipated to be in excess of $11.5 million.

[Acting percent] of the [specific plan] that we announced in 2006, in January of 2008, we created Navios South American Logistics by acquiring 51% in Horamar for about [$812 million]. Our partners in this venture is the Lopez family who has over 30 years of experience managing and growing the barge and upriver port terminal business. We believe that combining their business with our port business creates a critical mass necessary to be a real competitor in the (inaudible) region. Today we own approximately 64% of the Lopez family and [of those] 64% of the Navios logistics and the Lopez family owns the balance of the newly formed Navios logistics. Our plan is to continue to create scale and grow this company while creating value for our shareholders.

With that, I would like to turn the call to Mr. Mike McClure, who will take you through the Company review of Navios in the Investor Section. Mike?

Thank you, Angeliki, and good morning to all. Please turn to slide 10. Navios Holdings currently contains 62 vessels and 6 million deadweight, making it one of the largest U.S. listed dry bulk carriers. The fleet consists of 34 vessels currently in operation with an average age of 4.3 years. This is considerably younger than the industry average of 15-plus years. Please note that the Navios group which includes the Navios Partners' fleet, controls 71 vessels equal to 6.8 million deadweight. The Navios Holdings fleet is comprised of 18 capes, 23 Panamaxes, 15 Ultra-Handymaxes, and 6 Handys. Of the 62 vessels, 25 are owned and 37 are on long term charter-in. Navios Holdings has purchase options on 21 of the chartered-in vessels. Thus, our charter-in strategy allows for fleet expansion with 0 capital outlay. Additionally, Navios Holdings also controls between 10 to 30 short-term vessels at any time primarily for use in the COA business.

And turning to slide 11. During the second half of 2007, Navios Holdings committed to a fleet development program which included nine new building Capesize vessels totaling over 1.6 million deadweight being built in South Korea and Japan. Seven of these vessels will deliver in 2009 and two in 2010. Approximately $203 million of deposits were made in 2007 and an additional $105 million is due in 2008. Approximately $34 million of these deposits will be funded from debt financing.

Turning to slide 12. Navios Holdings has also committed to 15 new building vessels with a combined deadweight of about 1.1 million. This fleet will have a chartered-in period for an average period of 10 years and we will also have purchase options on these vessels, which will deliver mostly in 2010 and '11.

On the bottom of this chart you will see that during 2008, Navios Holdings will take ownership on three chartered-in vessels, enhancing net asset value by approximately $260 million. It has been our policy to exercise purchase options that are deep in the money.

Please turn to slide 13. Navios Holdings continues its policy of locking in secured and insured long-term cash flow with creditworthy counterparties providing visible earnings and steady cash flow. We have been successful in obtaining AA insurance on all charter-out contracts which provides coverage in the event of non-payment. This is unlike most policies, which require a legal process to determine that a default has indeed incurred.

The percentage of Navios Holdings owned and long-term fleet that is now chartered out equates to 96% for 2008, 46% for 2009; and 21% for 2010. Navios Holdings daily average charter-out rate for 2008 is $24,762. For 2009, the rate increases to $29,233. And for 2010, the rate is $30,875, resulting in significant contracted revenue over the next four years.

Turning to slide 14. Navios Holdings continues to incur vessel operating expenses which are significantly below the industry average through its in-house technical management team and from being proactive with repairs and maintenance. As mentioned earlier, Navios Holdings has favorable charter-in contracts with an average daily cost of $9,681 during 2008. These charters originate from our strong relationships with multiple shipowners and provide attractive terms and rates. Compared to our 2008 charter-out rate of $24,762, the average daily cost provides sizable, favorable margins.

Please turn to slide 16 where we will begin our review of the industry. During the fourth quarter, the BDI, the Baltic Exchange Dry Index, reached new highs followed by a decline of about 49%, but to a level that was still high when viewed from a historical perspective. Industry fundamentals continue to be strong and this has been borne out by the BDI, which has experienced a 26% upturn in Q1 2008. Indeed, current events demonstrate the strength of the underlying fundamentals. This week, Korean and Japanese steel mills concluded a 65% price increase on iron ore from Bali. This may soon lead to an industry-wide price settlement, easing the uncertainty that has surrounded iron ore exports and leading to sustained exports. Notwithstanding this, we also believe that the 2008 freight market will be characterized by a high degree of volatility due to the tight supply/demand balance that will ebb and flow but will remain at healthy levels.

Slide 17. Emerging countries now contribute over half of the world's GDP. As these countries progress in urbanizing the infrastructure development will continue to require massive amounts of raw materials for steel manufacturing and power generation. Seaborne demand is amplified by changing trading patterns requiring the movement of dry cargo over longer distances. China will become a net importer of coal and grains during 2008, resulting in their neighboring countries importing their needs from countries that are significantly further afield. This acts to effectively reduce vessel supply and availability, as vessels are now employed for a longer period for the delivery of the same quantity of commodity.

In addition, China is absorbing a great deal of vessel capacity through its low cost and efficient coastal trade, which transports coal from its northern coal-producing provinces to its southern coastal provinces for electricity production. This coastal trade is growing on par or faster than China's GDP, as many of its power stations are built on the seaport, and major rivers and freight is being shifted from overcrowded roads and railways to water. This is being supported by substantial investment in the number of new coal-loading ports. In addition, growing volumes of iron ore, infrastructure development material, and foodstuffs are being moved in the coastal trade.

Please turn to slide 18. This chart shows on a macroeconomic level the growth in the dry cargo trade on a volume basis over the past 28 years. The first 10 years saw a growth rate of 1.4% followed by a 10 year period of 2.8% growth. That doubled again once China was admitted to the World Trade Organization. Note that India and another emerging countries will provide yet an unknown level of growth as their own industrialization and infrastructure projects expand.

Turning to slide 19. The demand for bulk carriage of iron ore is being accentuated by developments in the coal and grain trades. Global commodity shortages and changes in countries' export and import policies are forcing end users to scramble for available supplies, thereby challenging these end users to source their requirements for more distant locations. This has the beneficial effect for our industry of increasing ton miles and reducing fleet productivity. For a six year period shown there -- shown here, there has been a 7.7 compounded annual growth rate in 10 mile demand.

Please turn to slide 20. As an example of the changing trading patterns, is shown on this chart on the left, which depicts that Brazil increased its exports of iron ore in 2007 to China by 29% as compared to a smaller increase from Australia. The increase in the amount of iron ore cargoes sourced out of the Atlantic to the Pacific combined with the almost unchanged number of trips back in the other direction has not only increased ton miles, but has created a major inefficiency in the market. Ballast time has increased as more Capesize vessels ballast from the Pacific to load cargoes out of the Atlantic.

For the first time in years, global supply in 2008 from the major iron ore exporting countries will exceed 100 million tons with Brazil and Australia providing the bulk of the increase. Thus, iron ore will continue to dominate as one of the main demand drivers for dry bulk shipments.

Slide 21. The chart on the left displays the major impact the Chinese industrial production growth had on the dry bulk trade since 2003 after China was admitted to the World Trade Organization. Prior to then, the OECD economies provided the major impetus to world growth.

The chart on the right displays field production per capita for Japan, South Korea and Taiwan versus China and India. Note that for the first three countries they expanded their steel production during their industrialization, which resulted in a high percentage of growth for over 20 years. China followed by India are in the relatively early stages of growth and development, which promises to create continued increasing demand for iron ore, coal and construction materials. Also note that the three countries combined have a smaller population than either China or India, who have inhabitants of over one billion people.

Turning to slide 22, we addressed the supply/demand dynamics of our sector. As of year end, the order book for dry bulk vessels delivering through 2010 constitute about 41% of the existing fleet. Keep in mind, however, that the order book includes many uncertainties. One can question whether the ships will be built or built on time, as some of the new building is scheduled for yards that are not yet in existence. In addition, one can question the commercial viability of orders together with their financing at a time of tightening credit.

Due to strong market conditions, older vessels are not being scrapped. As a result, vessels over 20 years of age constitute 29% of the fleet and 14% are over 25 years of age; 25 years being the historical, economic commercial useful life of a vessel. This can act as a self-correcting mechanism if the market weakens. In addition, at some point, older vessels have to be scrapped.

In conclusion, the fundamentals suggest that the freight market will continue to remain in historically high territory. Although the U.S. and parts of Europe are encountering economic headwinds, the emerging countries are providing increasing demand for all dry bulk cargoes. Unlike prior years of economic uncertainty, the majority of the emerging market countries have favorable financial conditions and are able to maintain their domestic growth without undo influence from Western countries.

At this time, I'd like to turn over the call to George Achniotis to review the fourth quarter and 2007 financial results. George?

Thank you, Mike, and good morning, all. I would now briefly review Navios' financial results for the fourth quarter and the year ended December 31, 2007. The financial information that I'm about to discuss was included in this morning's press release and is summarized in the slide presentation on the Company's website.

As shown on slide 24, revenue for the three months operations ended December 31, 2007 increased by 496% to $308.5 million as compared to $51.8 million for the comparable period of 2006.

Revenue from vessel operations for the three months that ended December 31, '07 grew by 511% to $306.6 million as compared to $50.2 million for the same period during 2006. The increase in revenue is mainly attributable to the following factors. First, an increase in the number of operating days by 1,526 days. Second, the improvement in the market, the average time charter equivalent rate excluding FFA's for the quarter was $38,648 per day versus $20,956 per day higher than the rate that shift in the same period last year. And third, an increase in the number of COA service by Navios, which were acquired as part of the acquisition of Kleimar.

EBITDA for the fourth quarter of '07 was favorably affected by the gain relating to the sale of assets of Navios Holdings to Navios Partners amounting to $167.5 million, and it was adversely affected by $1.8 million relating to [final] lease accounting of certain vessels on the Kleimar fleet.

Excluding the effect of these items, EBITDA for the quarter would have been $49 million as compared to $24.3 million for the same period of '06; an increase of 101%. The increase in EBITDA is mainly attributable to the increase in revenue by $256.7 million from $51.8 million for the fourth quarter of '06 to $308.5 million in the same period of '07. An increase in FFA gains of $5.7 million between the two periods and the effect of treating 12 Kleimar vessels as [final] leases instead of [S1] vessels.

The above increase in EBITDA was mitigated mainly by first, an increase in time charter or voyage expenses by $233.5 million between the fourth quarter of '06 and the same period of '07; second, an increase in the direct vessel expenses of $1.4 million as a result of the increase of ownership days in the fourth quarter of '06 compared to the same period of '07; and third, an increase in general and administrative expenses by $5.2 million due to the introduction of a new bonus scheme for all employees and the acquisition of Kleimar during 2007.

On other categories, other income expenses, income from investments, in [finals] leases, income from affiliated companies, et cetera, reflected a positive variance of $0.6 million for the fourth quarter of '07 compared to the same period in '06.

Net income for the three months ended December '07 was also favorably affected by $167.5 million from the sale of assets to Navios Partners. Excluding the effect of this item, net income for the quarter increased by 442% to $29 million compared to $5.4 million for the same period in '06. The increase is mainly attributable to the $24.7 million increase in EBITDA and the increase in interest income by $3.9 million. This is partly mitigated by $1.2 million increase in interest expense, a $0.9 million increase in depreciation and amortization, an increase in share based compensation of $0.6 million, a $0.5 million increase in deferred income taxes calculated for Kleimar, and the effect of treating 12 Kleimar vessels as finals leases instead of as owned vessels.

Time charter and voyage expenses relating to vessel operations increased by $233.4 million in the three month period ended December 31, '07 compared to the same period in '06. This was primarily due to the delivery of three new vessels and with charter-in fleet; the higher charter-in expenses relating to Capesize vessels; and servicing the related (inaudible) following the acquisition of Kleimar.

Direct vessel expenses for the operation of the owned fleet increased by $1.4 million for the three month period ended December 31, '07 as compared to the same period in '06. (inaudible) vessel expenses include crew costs, provisions, deck and engines stores, lubricating oils, insurance premiums, and maintenance and repairs. The increases resulted primarily from additional costs related to the increase in ownership days in the fourth quarter of '07 as compared to the same period in '06.

Turning now to the 12 month results highlighted on slide 25. Revenue for the 12 months ended December 31, '07 increased by 269% to $758.4 million as compared to $205.4 million for the same period in '06. This increase is mainly attributable to the increase in operating days by 28% or 2,867 days as well as the improvement in the market resulting in higher charter-out rates and the increasing number of COA service by Navios acquired as part of the acquisition of Kleimar.

Included in revenue is revenue from the port in Milan, which contributed $9.7 million compared to $8.7 million in the same period of '06. This is attributable to increased throughput of 300,000 tons for the 12 months ended December '07 compared to the same period of '06.

EBITDA for the year ended December 31, '07 was favorably affected by $167.5 million from the gain of the sale of assets to Navios Partners and adversely affected by $9 million due to the accounting of certain Kleimar vessels as finals leases instead of as owned vessels. Excluding the effect of these items, EBITDA for the year would have been $191.4 million as compared to $108.5 million in the same period of '06, an increase of 76%. This $82.9 million increase in EBITDA is mainly attributable to the increase in revenue by $553.1 million between the 12 months of '06 compared to the same period of '07 and the gaining (inaudible) of $26.4 million in the 12 months of '07 versus a $19.8 million gain in the same period last year. The above increase was mitigated by first, an increase in time charter, voyage and port terminal expenses by $473.4 million; second, the increase in direct vessel expenses by $7.7 million due to the increase in ownership days from 3,979 days in 2006 to 6,473 days in 2007; and third, the increase in general and other expenses by $7.4 million.

All other categories, other income and expenses, income from investments and finals leases, income from our affiliated companies et cetera, reflected a positive variance of $2.7 million in the 12 months of '07 relating to the same period in '06.

Net income for the year ended December 31, 2007 was favorably affected by [$167.5 million] due to the sale of assets to Navios Partners. Excluding the effective of this, net income for the year would have been $103.5 million compared to $32.1 million in the same period of '06, an increase of 222%. The increase is primarily due to the $82.9 million increase in EBITDA, the $7 million increase in interest income due to the higher average cash balances during 2007 compared to 2006; and the $5.2 million decrease in depreciation and amortization. This was mitigated by a $9.4 million increase in interest expense, a $0.2 million increase in amortization of drydock and special survey costs; a $0.6 million increase in share compensation expense; a $4.5 million increase in deferred income taxes calculated for Kleimar; and the effect of treating 12 Kleimar vessels as finals leases instead of as owned vessels.

Turning to the next slide, number 26, I will highlight key balance sheet changes between December 31, '07 and December 31, '06. Navios' cash and cash equivalents balance including restricted cash on December 31, '07 was $511.3 million versus $115.9 million at the end of December 31, '06. Total assets grew by 109% to almost $2 billion. This growth was generated primarily by a number of factors including first, the acquisition of Kleimar; second, the net proceeds of the secondary offering in May; third, the exercise of warrants; fourth, the additional one vessel into the owned fleet from the long-term charter-in fleet; five, the acquisition of the remaining 50% of one Panamax vessel whose remaining 50% is held by Kleimar; and six, the profit from the sale of assets to Navios Partners.

The long-term debt including the current portion increased to $315.9 million at the end of December 31, '07, versus $270.1 million at the end of December 31, '06. This increase was due to the acquisition of Kleimar, the exercise of the option to acquire Navios Hyperion, and the additional financing for the acquisition of two new building Capesize vessels to be delivered in 2009. Despite the increase in long-term debt, the net debt to book capitalization ratio decreased significantly from 53.7% to 7.4%. This decrease was due to the additional equity raised through a secondary offering; the exercise of warrants; the cash generated from the sale of assets to Navios Partners; and the cash generated from operations.

Turning now to slide 27. One item that due to U.S. (inaudible) is not reflected in our balance sheet is the full value obtained by Navios Holdings from the contribution of its assets in Navios Partners. Navios Holdings received a total of $353.3 million in cash from Navios Partners in connection with the sale of 8 vessels by Navios Holdings to Navios Partners. In addition, Navios Holdings and the general partner control approximately a total of 8 million units in Navios Partners. Therefore, assuming the price of the publicly traded units as a proxy for our valuation, as of December 31, 2008, the value of our interest in Navios Partners is approximately $153 million and the total value obtained by Navios for the contribution of these assets in Navios Partners was $506.3 million.

An additional U.S. GAAP technicality does not allow Navios Holdings to recognize this portion of net income from Navios Partners. This is due to the fact that the Navios Holding units are subordinated and to the extent that Navios Partners earnings by unit are not enough to be allocated to the subordinated unitholders, Navios Holdings will [only] recognize income from Navios Partners to the extent of actual dividends received. It is clear the timing difference as revenue was earned in one quarter but it is distributed and recognized in Navios Holdings in the next quarter.

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

Thank you, George. And this completes our formal presentation. We open the call to questions.

(OPERATOR INSTRUCTIONS). Jonathan Chappell, JPMorgan.

It's Jon Chappell, JPMorgan. Angeliki, you mentioned both in the press release and in your comments about --

I think maybe something technical -- let's go to the next question.

Hello?

Urs Dur, Lazard Capital Markets.

Nice quarter, guys. I hope all is well there and thanks for the call. I have very, very simple questions -- one on market and one more modeling thing. It was mentioned that G&A was up a bit this year and part of that was associated with a bonus program which is new this year for the employees, which is fine, but how much was that equivalent to in this quarter?

I think (inaudible) in the presentation was about $3.6 million. And this is the first compensation program we had from bonus program from three years of operation that the Company has [in]. Also, there is a $2.2 million of any additional SG&A that it was a claim effect that you didn't have last year.

Yes. I apologize -- I am away, I'm am on a mobile at the moment so I haven't seen the fall presentation, so sorry if I asked a question that's answered elsewhere. The other question is more for Mike and also forgive me if you didn't go through this any further, but I do know that you mentioned something about the scrapping of ships coming up simply because of the age of the fleet and overall demand. What is -- can you give us some color on the quality of the order book? I think there's some interest out there as to when a lot of the orders that we see on paper today, when they get delivered. And how they get delivered and what the quality will be. And what's your view on the quality of your order book overall?

Well, that's really difficult to ascertain. We do have some skepticism regarding it. We do know that some of the vessel contracts with some of the yards have been canceled due to the financing falling behind the vessel orders. And of course as you've heard before, there's a lot of vessels being built in yards yet to be built themselves or at yards that haven't built the larger size vessel. So many of us in the industry do view the order book as being uncertain at best.

And I think just to add to Mike, I think the scrapping will definitely have to pick up because purely a timing issue. Additionally, there is a very good report has come about on Chinese coastal shipping. They also will need and they calculate even in the next -- for the next couple of years, we are absorbing about higher than 2% of the world fleet additionally because also a lot of the fleet that is employed there is really of age. So this is a very positive effect and the reports they have come out and named the three. And this is additional to the (inaudible) supply and demand dynamics.

Okay, very good. That's all I have and very much appreciated. Good quarter. Thank you.

Jonathan Chappell, JPMorgan.

Thank you. Can you hear me now? Hello? You guys hear me?

Jonathan is not (inaudible) today. Let's go somewhere else. We cannot get him. There's some kind of a problem I think in his line.

Natasha Boyden, Cantor Fitzgerald.

Can you hear me?

You make the job very difficult. You have to make the questions online after that.

Okay, hold on a second. We have on line Ms. --

Hello? Can you hear me? Okay. Thank you, operator. Good morning. Can you hear me, Angeliki, Mike?

We apologize. It's all some fault, as you know.

Can you hear me, Angeliki?

Very, very well. Loud and clear.

Just looking at your balance sheet, you obviously have a lot of liquidity though, which is great, and you have publicly announced a dividend increase in the share repurchase program today, which I'm sure will go across very well with investors.

But can you talk about how you're thinking about deploying some more of that capital? Are vessel acquisitions, are they still attractive to you given where asset prices are and rates? Or would you be thinking more along the lines of perhaps a one-time dividend or even additional share repurchases?

(inaudible) our core fleet is really shipping and it remains to be profitable. This year we have seen long-term employment, five year contracts that are actually higher than we have seen last year. Take an example of the Capesize vessel yesterday, that was about [78 thousand -- 78 point $5,000] per day for five years. So you cannot say this is not a healthy environment to do investments. And the residual value this makes a lot of sense.

Of course, we will be concentrating on shipping. But let's not forget the IPO of the Navios Partners in late November and within less than 45 days we already had -- also did the acquisition in South America. So we are not -- as you know, we are not [this] company. Of course our main business is shipping. And we see that there is a lot of opportunities.

What I have to stress is that [period] market is very healthy. You have a little bit of a -- on the port you may have ups and downs which is inevitable. But [fear] has become very healthy and also forward period is very healthy.

Are you still seeing in terms of acquisition, are there still some fleets out there to purchase along the lines of the Kleimar fleet? Or is it really more a question of one or two vessels at a time?

No, fleets are available. You have available fleet and you have available fleet with new buildings. I think that however, shipping is seriously and finalizing may have (inaudible) a very capitalize company who have no problem -- you have the greatest (inaudible) opportunities for companies with a better balance sheet and the largest capacity. So there is a constant flow. We have seen that with numerous examples.

And would I be right in assuming that perhaps a fleet would be more attractive to you, Angeliki, than perhaps the one or two vessels that come up every now and then?

I have seen that from -- I mean, last year we did $1 billion of acquisitions on [Cape] and about well, not on fleet if you take it about 800 million [quesian] on (technical difficulty). We are not afraid of doing this. I think more private to public is due to the multiples it makes more sense. But you know this is how you do it.

Jonathan Chappell.

Can you guys hear me now?

Very well.

All right. Third time is the charm.

I think it's either Tom or Natasha is doing this. (inaudible)

I expect to see your G&A lower in the first quarter because of this new conference service you're using. Just kidding.

If I can follow up on the consolidation questions. You have a ton of cash on your balance sheet, obviously. And there's some concerns about lending in some of the shipping banks. I'm curious as to what your target mix of debt-to-equity would be. If there would be a little bit more of a focus on equity spend given the tightness in the credit markets now and given your quite liquid balance sheet?

I'm anxious to be (inaudible) low. We would definitely invest cash if it is appropriate. We have seen that there is -- after the initial stock of different banks and depending of the problems -- not only in the shipping portfolio because there is no banks having problems in the shipping portfolio, they have mortgages and other problems. We have now seen a very healthy number of banks that are able to loan significant amounts. So we have no really problem of that.

And we are able today to take opportunities as they come from this year on vessels. Of course, always our strategy is to make sure that our investment is also, we have a view about how we can put a very reasonable residual value when we do some expansion.

I would imagine you probably want to get the leverage back up on the balance sheet. Do you see that most of the CapEx for 2008 -- whether it's the purchase options or privus payments on the new builds will be debt financed? And have you talked to the banks already? And what are the terms that they're talking about?

On actually, I don't know that I have seen -- in the new buildings program that we have, we already have done financing of two of the vessels which we did in January. And then we have reported this financing. The terms we are getting for the financial provision is very much in line with what you already have seen over the last commitment we got. So it was at a very reasonable 80 basis points, 90 basis points, it's very -- we can find very good terms.

The majority of the payments we have this year is later in the year. We are targeting ourselves to we think 2008, even though we wouldn't need to, we are targeting to actually pay the finance within 2008. We like to be conservative so we like to have our credit lines in place.

Your time charter coverage drops quite significantly in 2009. I'm sure throughout the course of this year you will be re-chartering vessels. How are you trying to balance shorter term, maybe less than a year or one year contracts versus three to five year contracts for your ships as they roll off their current charters?

As you know, we have had approach for the Navios Holdings of about 2.5 to three years [to five]. We may come more to the three years [for five] this year. We have seen that 2009 in our new building program we provided a significant opportunity for the increase of our EBITDA. And the Capesize markets, it inevitably we see it is in very good shape for long-term employment with (inaudible) the really top-of-the-line quality names that you can really have their contracts and be very sure of you actually getting your money -- in a very strong market I think and our positioning is not (inaudible) anything. We will do it step-by-step.

Would you want to do it maybe a little bit earlier with the capes given that the five year contracts are very strong right now? I know it is still pretty much a year and a half away until you start receiving the new capes, but given the strong counterparties, given the good five year rates right now and maybe some uncertainty into next year, do you think you might start chartering those ships a little bit before you normally would?

What we do is timely. As you know, last year we did two -- I mean we would be expecting them within the year on appropriate moments. We don't have to flood the market with one moment.

Okay. That's all I had. Thanks for finally letting me on.

Yes, talk to your question is also we see a healthy market, I mean, to be able to position this happening.

[Chev Beakinhaus, Beakinhaus & Co.]

I want to congratulate your entire team on an outstanding performance. Most of my questions have been answered. The only suggestion I have is that you might think of using some of your cash to buy in the Navios Partners stock, which currently yields 9.20. It's come down since it was issued. And I think at this size, instead of your having 41% of the Company, you might want to build it up to 45% or 50%.

We always like to hear advice from wise people like you. We have seen that. It is really an extremely solid performance on the Navios Partners. But gives us the opportunity to also increase our dividend in the Navios Holdings as we are getting really very nice and good stream of cash flow. So we will always take into consideration your thoughts. And we'd like -- operator, the next one?

John Parker, Jefferies.

George, can you clarify the accounting for Navios Partners? You indicated that it will not show through your balance -- your income statement until you get dividends. But the balance sheet doesn't seem to have any place holder for those shares you have in Navios Partners. Is that just the way it's going to be?

That is very nice. You make sure we don't overestimate anything. So we will not have share holding in the units. You see it nowhere. George will explain that to you. And secondly, you cannot report your earnings that you receive as dividends in the quarter you are receiving it.

It is a very technical issue. But until Navios Partners there is enough profits to be distributed to the unitholders, we cannot reorganize anything in NM. We can only reorganize the dividend that we are getting. And the same applies for the balance sheet also. Until Navios NMM has enough assets which indicates a distribution can be also be distributed to NM, to the subordinated units, we can not reorganize anything on our balance sheet.

Okay. Also, what's your view on the growth and a VOLC fleet and how that will impact the Capesize trading?

I think, John, we have already stated that we have not really seen the conversions. It's something that we are not -- we don't believe will be really a threat because as of today the ones that have converted have not been really able to function. They have been full of cracks, they have been full of -- they're going in and out shipyards. So the converted VOLCs I don't believe -- it's a personal opinion, we follow it but we do not believe it is going to be a (inaudible) is being afraid, it is more of an indication of a high market. I think the vessels that will be viable in our fleet but is later -- I mean, 2011 -- is the VOLC dedicated specifically for the trade of drybulk. And that I think is something that we have seen -- it will have -- they will come into service. Of course, in that moment a lot of them will be dedicated to [mine] companies and et cetera. So this is something that we follow.

Justine Fisher, Goldman Sachs.

The first question I have is just following up on the last comment that you made about conversions. I hadn't heard that there were so many problems with the vessels that had already been converted. So first of all, how many do you think have been already been converted? My assumption is that it's not many out of the total 30 that people say.

And then second of all, can you give us a little bit more color on what's happened to those vessels? I mean, there haven't been any reported accidents, but --?

We had as part of a yearly briefing we had -- the major U.S. -- the major English firms giving us presentation. What we have seen is that there was two conversions that they had numerous problems. And we think in and out to the shipyards. So this is something that we follow. I don't believe that the vessels that it is not built for a specific reason. And we've had [time] with a very old fleet that we are having and the extreme repairs that they have to go through China is going to be an easy conversion. So in the two that they are already in the water, we know that there exists a lot of problems.

And so an argument is that because it's this sort of older and single hull VOLCs that people are sending for a conversion, they have more issues actually getting to be sea-ready VOLCs?

Not only that, the thing is -- the matter is you have a bigger beam, you have, so it is a wider vessel. You cannot really load it in the correct sequence because all the actual equipment for loading does not go to the center of the hull so the stress is tremendous. So you have ceiling stresses and tension. So it is a purely also of the -- you don't have the facilities to accommodate and note properly that vessel. (multiple speakers) From loading and from the ballast [streets] they have problems.

So if we assume that even just half of the VOLCs that were supposed to be converted this year, just for argument's sake are converted, I'm wondering how they would affect the Capesize market for iron ore in particular? Because I think, Mike, in your presentation you were talking about how iron ore specifically will be positive for Capesize. But if the VOLCs take a big chunk of that business, what do you think that would do to the Capesize as far as pushing it towards the coal trade? I mean, are there any other dynamics we could expect if the VOLCs actually are converted and seaworthy?

The existing fleet that is already there, we already know. It's not the surprise. Whatever we are discussing takes into consideration that this will be viable vessels. And now the thing is there is a very good chance, technically speaking, purely from the [ceiling] forces and the speed of loading, of not being able to be a viable vessel. So this is something that you already have within the order book.

Okay. I'm not going to be able to use the next -- the next question I have is just as far as the deposits for vessels in 2009. You said that you've got $105 million for '08. But do you have an estimate as to what you might have to pay for your vessel deposits in '09?

We can provide that. In 2009, you have also the deliveries. But we are planning within 2008 to totally put the financing in place which will be in line with as usual debt to equity ratios.

Okay. So you will get back to us with a number for '09 deposits?

'09 is also the deliveries. So we make the whole amount due.

But you don't have a dollar amount, though? Because there's $105 million for '08, but the slide presentation doesn't say how much there is for '09?

The $950 million is for the whole fleet purchase. You have $200 million [already] and the $105 million for 2008. The rest is due in 2009.

All of the rest is '09. Okay. I just didn't know how much was in 2010, et cetera. Okay.

And as far as the financing goes, is this just going to be another large terminal facility? Or do you have any other types of financing that you'd like to obtain for this?

This is our job. We try to find the best deals.

There are no more questions. I will now turn the conference over to Angeliki Frangou for closing statements.

Thank you very much. And we apologize for the technical problems.

That concludes the Navios Maritime Holdings fourth quarter and year-end 2007 earnings results conference call. You may now disconnect your line. Thank you.