Navios Maritime Holdings Inc (NM) 2013 Q1 法說會逐字稿

Thank you for joining us for this morning's Navios Maritime Holdings first quarter 2013 earnings conference call. With us today from the Company are Chairman and CEO, Ms. Angeliki Frangou, President, Mr. Ted Petrone, Chief Financial Officer, Mr. George Achniotis, and SVP of Strategic Planning, Mr. Ioannis Karyotis.

As a reminder, this conference call is also being webcast. To access the webcast, please go to the investor section of Navios Holdings' website at www.navios.com.

Before we review the structure of this morning's call, I'd like to read the Safe Harbor statement. This conference call can 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 current beliefs and expectations of Navios Holdings' management and are subject to risk 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 in this conference call should be understood in light of such risk. Navios Holdings does not assume any obligation to update the information contained in this call. Thank you.

The structure of today's call is as follows. We'll first have formal remarks from the team, and after, we'll open the call to take your questions. And now, I'd like to turn the call over to Navios Holdings' Chairman and CEO, Ms. Angeliki Frangou. Angeliki?

Thank you, and good morning to all of you join us on today's call. We are pleased to report our results for the first quarter of 2013. We had a solid quarter and reported $38.5 million of EBITDA.

We continued to maintain our operating discipline, with moderate leverage of 42%, and increased our total cash position to about $332 million. We also focused on shareholder value and returned capital to our investors through dividend payments and declared $0.06 dividends for the first quarter to record holders on June 18, 2013.

Slide two shows our current corporate structure; the value of Navios Holdings primarily derived from four areas -- the dry bulk fleet within Navios Holdings and three principal operating subsidiaries. In our view, the whole is valued at less than the sum of the parts.

As of the close of business on Friday, Navios Holdings common share operated at $4.77 fair share. In contrast, Navios Holdings' stakes in the two publicly listed subsidiaries were valued at $4.41 per share. This implies a valuation of less than $77 million for Navios Holdings core business, comprised of 58 vessels and Navios Holdings' ownership interest in Navios Logistics combined. This assessment to us seems to miss the mark, as we believe the value of Navios Holdings interest and Navios Logistics alone is much greater.

For the first quarter of 2013, Navios Logistics reported a $14.1 million of EBITDA, and this Company had significant growth buffer. In addition, the provisions of Navios Holdings has 58 vessels, which have significant earning power.

Slide three highlights our strong competitive positioning. We have a conservative balance sheet with net debt capitalization of 42% and liquidity of $362 million. Our liquidity should be viewed in the context of the Company having no material debt maturity for four years and no unfunded CapEx. Therefore, our liquidity is dedicated to the operating needs of the Company and expansion opportunities.

In terms of revenue, at the peak of the market, from 2007 to 2008, we focused on generating long-term charter revenues from credit [called] counterparties. This proved to be correct, in light of the subsequent market collapse. Now, five years after the market correction, we are 69.3% fixed for 2015 and almost 16% fixed for 2014. Navios increased in open days, this occurring five years into [this side put]. These open days are an outgrowth of our strategy to fix long-term charters when the market rates justify it and be patient when the market is less robust. Therefore, we are well positioned to capture any market recovery.

In light of our strategy, we provide you with our 2015 cash breakeven analogies. As you can see, our contracted cash flow is an unmanageable deficit for 2015. However, we also have 5,127 vessel days open, which, when you do the math, means that we need to average only $7,151 per open vessel day to break even.

Looking at our open days, about 55% is [Handymax] days, 34% is Panamax days, and 11% is Capesize days. The current on again, time softened market, weighted to reflect our open days by vessel time type, is almost $9,776 per day. Using this rate, our 5,127 open days would generate almost $50 million of additional cash, putting us in a comfortable position in this [route] of the market. Looking forward, we also do not foresee that the market will materially weaken from here, and we take some comfort from the 20 year rates, which are significantly higher from the current market rate.

We have further strengthened our competitive positioning in the marketplace by securing a business relationship in Germany with HSH Nordbank and in Asia with one of the top two private Japanese owners controlling over 100 vessels. Each partners brings its own strength to the table and provides crucial relationships for a creative expansion on our business.

Turning first to our partner, HSH Nordbank, we recently announced the possession of ten vessels through the debtors of HSH Nordbank. We will be making this acquisition through a joint venture with Navios Acquisition, NNA. Slide four reflects the innovative financing structure we developed. It allows a Navios Venture to receive 20% plus economic interest for only a 5% equity investment. Looking at it in another way, through this acquisition, we will control $200 million of assets, 10 vessels, that will only be five year old, for only $130 million of cash.

The cash payment will be funded by approximately $120 million of senior bank debt, equal to 60% of the current fair market value of the vessels, and $10 million equity investment by the Navios JV. The transaction provides opportunity for Navios to leverage its expertise in order to acquire a significant fleet at historically low values and allows HSH to move its assets from insolvency into a stable situation.

We feel that HSH values us as a partner because of our economies of scale and excellent technical and commercial management. With our partnership, HSH is able to meet its corporate directive by taking assets from an insolvent owner and placing them with us. We worked long and hard at this transaction and accomplished many firsts.

Turning to slide five, you can see that Navios Joint Venture will enjoy favorable economics. The joint venture will receive $12.7 million higher preferred return on its $10 million investment and a preferred return of this investment upon vessel sales. Thereafter, 20% of cash flow from operational shares will be paid to Navios until HSH subordinate loan is repaid, once HSH's loan has been satisfied, and Navios Joint Venture will receive 100% of any excess.

The HSH loan is important in what it does not represent. There will be no corporate guarantee on HSH subordinate loan by either NM or NNA, nor will this loan be consolidated into either NM or NNA. If cash flow from operations is insufficient to pay basic HSH subordinate loan, unpaid amount will not constitute [NIA] ability for Navios Joint Venture outside of a foreclosure. While the loan will be secured by a second priority vessel mortgage, their loan will be subordinate to any senior bank financing.

Also, the HSH subordinated loan only will be repaid from net cash flow from operations, to the extent there is any available after payments of Navios preferred return, and the HSH subordinate loan will be repaid from the net proceeds of the sale of the vessels after satisfying any unpaid priorities, then, to Navios and a return of Navios investment. Navios will also have the ability to invest up to $5 million in working capital at the 12.7% return, compounded quarterly. The working capital will be replaced out of free cash balances before any distribution.

We have been working closely with HSH over the past year to develop this program and are extremely proud to have reached a deal which benefits all parties. We are committed to the excellent working relationship and look forward to doing similar deals in the near future.

Turning now to our partner in Japan, macroeconomic conditions in Japan have opened up new opportunities for Navios. The depreciation of the yen has allowed Japanese owners to participate with global partners [in deal] -- which were previously impossible to execute. We recognized the opportunity to meet in Asia with a number of ship owners and shipyards.

We are pleased to find a similar minded owner, one of the two largest private ship owners in Japan, seeking to expand its network of revenue relationships and announced its strategic partnership with them in the form of Navios Asia, as outlined in the middle of the slide six.

So, Navios Asia will enter into a venture with the Japanese owner, whereby we will both invest in an entity that will purchase six vessels, five Panamax and one Kamsamax vessel, from our Japanese partners. The fleet we acquired is valued at $114 million, with five out of the six vessels having current employment, plus optional years at higher rates. Navios will have a 50% ownership in the JV and provide operational management for the fleet. In addition, for $66 million, Navios purchased four Panamax vessels with an average age of 7.75 years.

Slide seven sets forth a financial summary of the two transaction with a Japanese partner. For the acquisition of the four Panamax vessels, $26.4 million of equities required, we are anticipating financing the $39.6 million balance with debt. We estimate that this will create an annualized EBITDA of $11.1 million and annualized free cash flow contribution of about $5.8 million. The four vessels will have a [low] cash breakeven of $7,898 per day per vessel.

We anticipate financing with Navios Asia with about $40 million of equity, of which Navios Holdings will invest $20.4 million and our partner, the remaining $19.6 million. The $74 million will be financed with debt. We estimate we will create an annualized EBITDA of almost $16 million and annualized free cash flow of $5.8 million. The six vessels will be having an average age of 6.1 years and cash flow breakeven of $8,808 per day per vessel.

Slide eight shows our strong liquidity position. Our net debt to capitalization was 42% at the end of the first quarter of 2013, unchanged from the yearend 2012 and reflecting an 880 basis point reduction from yearend of 2011. In addition, we have debt liquidity of $362 million, of which $322 million was cash. As I mentioned earlier, we have no material debt maturities for four years, and all of our CapEx requirements are funded.

Slide nine has showed Navios cash breakeven. We have provided breakeven on both a pre- and post-restructuring of our credit default insurer that we concluded last year. We show our cash breakeven this way, because we wanted to emphasize the benefit of this restructuring. We moved about $175 million of future cash flows to our balance sheet without any discounting from the time value of money.

When the insurer requested the Navios Holdings, it starts with credit defaulting, so we considered whether to go along with their request, only based on applicable counter. We concluded that further significant partnerships were unlikely, given their (inaudible) that we understood each of our counter financial position. Thus, we prepare to have cash on our balance sheet over insurance, which we thought was less likely to occur.

Fortunately, on our cost side, we have a cash flow breakeven of $12,782 per day in 2013. Our contracted revenue is $12,065 per day in 2013. Navios Holdings has fixed 69.3% of their available days for 2013, in a very good position to capture market recovery. Our cash flow breakeven will further decrease as we successfully expand our fleet to approximate position of historically low valuations.

I remind you, as I do every quarter, that our breakeven analysis includes all operating expenses, dry docking, charter-in expenses for our charter-in fleet, G&A expenses, including credit default insurance expense, as well as interest expense and capital repayments. The sum of our competitive positioning is the following. We believe that our stability and demonstrated ability and willingness to honor our commitment and our competitive advantage.

The service we offer is becoming distinguishable from our peers because of this, and we are becoming a preferred commercial partner for interested participants. Indeed, these averages allowed us to develop two very significant prodigious relationships in what appear to be a short period of time. These averages are what attract charter suppliers to us, and they know that they can engage with us, knowing that we will meet our requirements.

I wanted to emphasize that while these averages might appear to some as earned overnight, they are actually the result of years of good work by our employees in showing excellency and creating the Navios standard. I would like now to turn the call over to Mr. Ted Petrone, Navios President, who will take you through Navios' participation and the industry perspective. Ted?

Thank you, Angeliki, and good morning, all. Please turn to slide ten. Our long-term fleet consists of 58 vessels, totaling 5.8 million deadweight. We have 45 vessels in the water, with an average age of 6.2 years. We have delayed the delivery of two long-term time charter new buildings to 2015 and 2016, respectively. This provides an annualized savings of $7.3 million.

Please turn to slide 11. Post the restructuring rating with our credit default insurer, Navios' average charter-out rate for its core fleet is $12,065 a day for 2013 and $17, 213 a day for 2014. 69.3% of Navios' fleet is charted out for 2013 and 15.9% for 2014. As depicted on the left slide -- side of slide 11, the white portion of the bars represents pre-insurance restructuring levels. The differentials in the charter-out rate and contracted days reflect changes as a result of the acceleration of charter payments through this $175.1 million (sic -- see press release) lump sum payment from the credit default insurer.

Please turn to slide 12. We enjoy vessel operating expenses about 25% below the industry average in all asset classes. Average current daily OpEx is $4,219. The $1,044 daily savings per vessel in operating expenses aggregates to about $16 million in annual savings, which goes directly to our bottom line.

The right-hand chart reflects the changes in the daily charter-out rate for the ships we have on long-term charter before and after the lump sum payment from the credit default insurer. We continue to enjoy good relations with these owners, our joint venture with the major Japanese ship owner, as an example of our strong ongoing relationships in Japan, dating back to the formation of Navios as a subsidiary of US Steel in the 1950s. This allows Navios to expand the fleet with minimum capital expense.

Please now turn to slide 13. Q1 saw the BDI fall to its lowest quarterly average since 1986 to 796, with very uneven earnings between vessel sizes. Capesize earnings slumped to a six-month low in March to $4,210 a day, on the back of over 30% reductions in both Brazilian iron ore and Columbian coal exports, due to weather and strike issues.

In contrast, both Panamax and Handymax has benefited from seasonal strength from South America grain exports and Pacific Basin coal movements. Since the end of the quarter, rates for Panamax and Handymax vessels have deteriorated slightly, while Capes have improved marginally. Brazilian Q1 iron ore exports this year were reduced, due to seasonal weather and onetime permitting issues.

[Valley] recently stated its commitment to achieve the same levels of iron ore exports in 2013 as 2012, which implies significantly increased Brazilian iron ore shipments through the rest of 2013. Valley's statement, combined with higher Australian ore exports, higher Columbian coal exports, and an expected decline in vessel deliveries in the second half of 2013 suggest increased demand for transportation in the balance of 2013.

Please turn to slide 14. Developing economies continue to be the engine for world GDP, and developing economies contribute a higher percentage of total world growth than the developed economies. In fact, developing economies now consume over half of the global requirements for most commodities.

Recently, the IMF slightly lowered its forecast for world growth from 3.3% in 2013 to 4% in 2014. In contrast, developing economies are projected to grow at 5.3% in 2013 and 5.7% in 2014. The Chinese economic growth is unchanged at 8% in 2013 and 8.2% in 2014.

Turn to our slide 15. The primary engines of trade growth continue to be China, India, and Brazil and other emerging countries adding strong growth. Dry bulk trade has expanded by an average of 5.5% per year in the last decade, since China joined the WTO. Consensus forecasts for 2013 are for global dry bulk trade to grow approximately 5% and ton mile growth of about 7%. A similar growth rate is estimated for net fleet growth, leading to a balanced supply/demand dynamics for the first time in over four years.

Please turn to slide 16. Currently, just over 50% of the world's population resides in urban areas. That figure is expected to grow to 67% by 2050, adding approximately 2.8 billion urban residents, with a large portion of urbanization occurring in the Asia-Pacific region. As you can see on the right-hand graph, income growth supports increased metal demand. The rising global income and the shift in the global economy towards Asia should support increased ton miles for the world bulk trade.

According to the Bloomberg and [miners'] websites, the currently planned expansions of mines feeding seaborne iron ore could reach annualized rates of 205 million tons in 2013 and accelerate from there. While the majority of these expansions are in Australia, over 30% will come from the Atlantic Basin iron ore ports, adding ton level.

Moving to slide 17, the continued development in urbanization in China will contribute significantly to steel consumption in 2013 and beyond. Infrastructure, housing construction, and consumer spending growth will underpin future developments. Underlying this trend is the 21% year on year Chinese fixed asset investment growth through April of this year.

Crude steel production in China through April was about 9% more than crude steel production for the same period in 2012. China imported 254 million tons of iron ore, 4% more than the same period last year. More importantly, as you can see from the upper left graph, imported stockpiles have been drawn down steadily, from 98 million tons in August of 2012 to about 70 million tons as of last week. At less than 20 days inventory, this is the lowest level since Q2 of 2009, which we believe sets the stage for restocking.

Domestic iron ore production increased 10%, year on year, but decreased 22% since between Q4 of last year and Q1 of this year. Going forward, the substitution of high quality imported iron ore for low quality domestic iron ore is expected to grow and will increase the tons carried in ton miles.

China is the world's largest coal importer today, having imported 226 million tons in 2012. China turned from being a net coal exporter and -- to a net coal importer in 2009. As the chart on the upper right indicates, China's seaborne coal imports have grown at a 20% CAGR since 2009, and imports are forecast to grow over the next several years, which will add to tons carried and ton miles. Over 15% of imports come from the Atlantic Basin.

Please turn to slide 18. Low freight rates, expensive fuel, and high scrap prices led to record scrapping of almost 34 million deadweight tons in 2012. Scrapping rates for older or less fuel efficient vessels have continued at very high rates this year. Through May 17, about 10.4 million deadweight has been scrapped. If this trend continues, scrapping could once again exceed 30 million deadweight in 2013.

The current rate environment should keep scrapping levels high, as about 12% of the fleet is over 20 years old, providing about 80 million deadweight of scrapping potential. Of note is that the current 2013 scrapping totals already include 13 ships that were less than 20 years old, four that were less than 15 years of age, and one that was 10 years old. As demolition prices appear to depend on overall steel prices, and not on the supply of vessels, they are expected to remain high. In our mind, we will continue to see the scrapping of older vessels and less fuel efficient vessels.

Moving to slide 19, 2012 non-deliveries amounted to 30%, resulting in net fleet growth of 10.3%, the lowest level in the last four years. Net fleet additions in 2013 are expected to be lower than last year. Non-deliveries through April amounted to 45%. This, combined with high scrapping, means that net fleet growth could approximately equal the expected increase in demand during 2013. Over 60% of the order book is expected in first half of 2013, then declines dramatically through 2014, and beyond, and is expected to remain that way, as banks continue severe restrictions on new building loans.

Please turn to slide 20. Slide 20 provides a retrospective of the rate environment and considers the impact of supply and demand equilibrium on rate recovery in 2013. As you all know, finding rate recovery to be meaningful and lasting, fleet growth rates need to fall below trade growth rates. As said earlier, a global GDP is projected to increase in 2013 and 2014 at 3.3% and 4%, respectively, from the more subdued rates of 2011 and 2012.

To date, the improvement has been moderate. However, the rate of change suggests that demand for dry bulk will increase in 2013, as new building deliveries continue to accelerate, and scrapping remains at record levels.

In summary, we note, that for the first time in four years, there is an expectation that net demand will exceed supply. Consequently, rate levels could pick up during the second half of 2013. We note these are conditions that were not yet evident over the past few years. I would now like to turn the call over to George Achniotis for a review of Navios' financial results. George?

Thank you, Ted, and good morning, all. Please turn to slide 21 for the review of the financial highlights of the first quarter of 2013.

I would like to remind you that this is the first full quarter where the effect of the actual grade to falling terms is reflected. The restructuring has resulted in lower time charter rates; hence, the lower rating on EBITDA. On the other hand, most of the differential was collected through a $175 million cash payment in November of 2012.

EBITDA for the first quarter of 2013 was $38.5 million compared to $62.6 million for the same period of '12. The decrease is mainly attributable to a 45% decrease in the time chart that we've been able to achieve. Compared to the TC rate in Q1 of 2012, falling rate has actually been shorter. The reflection was communicated by a 5% increase in the available days of the fleet, a $3.1 million decrease in general and admin expenses, mainly due to the restructuring of the credit default insurance, and $5.5 million increase in equity net earnings from affiliated companies.

EBITDA of Navios Logistics increased by $5.4 million in Q1 of 2013 compared to Q1 '12. During the quarter, we recorded a net loss of $10.2 million compared to a $9.5 million gain in the same period of '12. The decrease was mainly attributable to a decrease in EBITDA and was mitigated by a decrease in depreciation and amortization, an increase in income tax benefit in the Logistics business, and a decrease in share-based compensation expense.

Please turn now to slide 22, where the balance sheet highlights are presented. The cash balance, including restricted cash, as of March 31, 2013, increased to $322 million. This reflects our strategy of maintaining a strong cash position in order to be able to withstand the current distressed market and, at the same time, take advantage of additional distressed transactions that may become available over the next few quarters.

The current portion of long-term debt decreased to $7.9 million from $33.1 million at the end of the year, following the repayment in the quarter of the debt that was due in 2013. This reduced significantly our cash breakeven for the year.

Long-term debt also reduced by approximately $8 million in the quarter. Senior notes increased by $93.5 million, following the add-on to the Navios Logistics bond in March of 2013. Net debt/book capitalization remained the same, at a low 42%.

Turning to slide 23, the Company continues to provide a return to its shareholders through its uninterrupted dividend. A dividend for the first quarter of 2013 of $0.06 per share was declared to common shareholders as of June 18, to be paid on June 26. Please note that a total cash dividend inflows from the two investments in Navios Partners and Navios Acquisition exceed the cash paid out by Navios Holdings through shareholders.

Following Holdings' participation in the issuance of the additional shares in Navios Acquisition, the expected annualized cash dividend inflows will be over $41 million compared to approximately $25 million paid by Navios Holdings.

And this concludes the review of the financials. At this point, I turn the call back over to Ted for a review of Navios Partners and Acquisition. Ted?

Thank you, George. Please turn to slide 24. We currently own 23.4% of Navios Partners, including a 2% GP interest. Navios Partners operates a fleet of 25 vessels equaling 2.7 million deadweight, with an average age of 6.5 years. Since its inception in 2007, Navios Partners' fleet capacity has grown by more than four times.

We turn to slide 25. In slide 25, you can see the significant growth in all Navios Partners operating metrics since 2008. This strong growth has allowed Navios Partners to pay uninterrupted dividend distribution to us, regardless of market conditions. In 2013, we expect to receive about $29.4 million in distributions. This is about 119% of our expected annual dividend.

Please turn to slide 26. Navios Partners provides significant cash flow to Navios Holdings. Since its start of operations, Navios Partners has grown distributions by almost 27%, and we have received about $114 million in distributions from partners. Including NNA's dividend, Navios Holdings received about 167% of its expected annual dividend from its ownership in these two companies.

Please turn to slide 27. We have an approximate 52% economic interest in Navios Maritime Acquisition. Navios Acquisition's current fleet consists of 36 tanker vessels, totaling 3.7 million deadweight. Navios Acquisition currently has 23 vessels in the water, with an average age of 4.7 years. We anticipate that Navios Acquisition's new building program for product tankers positions Navios Acquisition to take advantage of a favorable long-term industry dynamics.

Please turn to slide 28. Navios Acquisition is summarized in slide 28. It has a large modern fleet and a diverse tanker fleet worth more than $1 billion. Navios Acquisition has a long detracted revenue that is well above the Company's low operating breakeven. Cash flow can sustain Navios Acquisition for a long period in uncertain market conditions.

Navios Acquisition has profit sharing arrangements in about 81% of its contracted fleet. These agreements limit the downside risk to the base rate and allow Navios Acquisition to enjoy the upside volatility. For example, in Q1 of this year, profit sharing amounted to $2.1 million. This was greater than the total profit sharing for all of 2012.

Please turn to slide 29. This slide demonstrates how Navios Acquisition's new building deliveries have -- are increasing EBITDA and building cash flow. Since 2011, available days have grown by 43%, and the fleet has grown by 36%. EBITDA has grown by 33% in 2012 and, over 2011, will continue to grow as NNA takes delivery of new vessels.

Based on Q1 2013, Navios Acquisition's annual EBITDA will be about $112 million, and this does not include the $16 million EBITDA from the seven contracted tankers delivering this year, [while the flagship], as yet uncharted, that will deliver this year.

Please turn to slide 30. Navios Acquisition provides significant cash flow to Navios Holdings. Since the start of this operation, Navios Acquisition has provided about $14 million in distributions. This represents about 4% of Navios Holdings expected annual dividend from its ownership and Navios Acquisition. This concludes my presentation. I would now like to turn the call over to Ioannis Karyotis, Senior Vice President of Strategic Planning, for a view of Navios Logistics financial results.

Thank you, Ted. Slide 31 provides an overview of Navios Logistics. Navios Holdings owns 63.8% stake in Navios South American Logistics. Navios Logistics has three segments -- port terminals, barge business, and cabotage business.

Slide 32 presents the highlights of Navios Logistics. We are one of the major logistics providers in the Hidrovia Region of South America, where we see significant opportunities to grow our business. While pursuing growth, we maintain our focus on long-term revenue from a diverse portfolio of high quality clients.

As shown on slide 33, in the past three years, revenue has been growing at a 14.6% compounded annual growth rate. At the same time, EBITDA has been growing at a 21.7% CAGR. In the first quarter of 2013, the growth rate has accelerated. Revenue increased by 46%, and EBITDA increased by 62%, compared to the same period last year.

In March, we completed a $90 million add-on to our existing 9.25% senior unsecured notes, due in 2019. The additional notes will issued almost 400 basis points above par at 103.75%. We will invest the proceeds to finance our capital expenditure plans, primarily to add capacity to our barge fleet and expand our port terminal infrastructure.

Please turn to slide 34 to discuss in more detail the results for the first quarter of 2013. We had a strong first quarter, with all segments performing nicely. Port terminals revenue increased by 87% in the first quarter, and EBITDA from this segment increased by 36% to $7.3 million. The significant revenue increase is attributable to a 151% increase in sales of liquid product in our port from $12.6 million in Q1 of 2012 to $29.1 million in Q1 of 2013.

As this is a low margin activity, revenue increased consequently more than did EBITDA. [I have here] that although this is a low margin business, it is relatively [restless] and outperformed back to back quarters.

Revenue in the barge business increased by 17%, and EBITDA increased by 57% in Q1 2013 over Q1 2012. We have seen a gradual recovery of liquid cargo transportation while all iron ore convoys [around the country].

Carbotage business reported a 26% increase in revenue, while EBITDA increased by 158% to $4 million in Q1 2013 from $1.5 million in Q1 2012, due to improved fleet utilization.

Interest expense and finance cost net increased to $5.4 million in Q1 2013 compared to $4.9 million in Q1 2012, due to the add-on to the bonding mark. Depreciation and amortization expense was $6.1 million in Q1 2013 as compared to $6.8 million in Q1 2012. Our net result was also positively affected by an income tax benefit of $3.8 million compared to a benefit of $0.9 million for the same period a year ago. Any sort of tax provisions, due to the reorganization of certain of our local facilities. Our net income for the field stood at $5.9 million compared to a net loss of $2.4 million in Q1 2012.

Please turn to slide 35. Slide 35 shows our strong balance sheet. At the end of the first quarter, cash was $139.5 million compared to $45.5 million at the end of 2012. Most of this increase represents the net proceeds of the $90 million bond offering completed in March. Net debt to book capitalization was 28% compared to 33% at the end of 2012. Now, I would like to call -- to turn the call back to Angeliki.

Thank you, Ioannis. This completes our formal presentation, and we'll turn the call to questions.

(Operator Instructions) Chris Wetherbee, Citi.

Hey, thanks. Good morning, guys.

Good morning.

Good morning.

Maybe just a question -- you guys have been tremendously active over the last couple of quarters, and, I guess, maybe, as you take a step back and look at where the potential opportunities seem to be presenting themselves or wherever -- maybe they're the most attractive, how do you think about that? I know you guys have done a lot with NNA, and now, there's some work you've done on containerships. I guess, what areas, Angeliki, are you looking at as providing the most potential opportunity, call it, in the next three or six months?

Chris, in essence, we have been working these markets for over a year, but we hadn't done anything, if you had seen, until, really, the last two, three months, from February. We had worked on -- we have -- I (inaudible) with banks, and this is the start of positive work with HSH. And in the German banks, we will have a combination of containers versus -- and with the products, and this is an area where we see multiple deals coming.

And (technical difficulty) is now in the dry bulk, an expansion in the business market, where we raise the best quality dry bulk vessels. We've -- and we can really be able to access deals as we not have been able to do [from the way]. So, the reality is two areas we see opportunities -- the German banking area and the Japanese market, where we see a lot of attractive builds. We can do lot of transactions without moving the market. We brought -- in essence, we can pull ten vessels in the dry bulk without really moving the S&P market.

Okay. And with -- and just sticking on Japan for a minute, so, with the move in currencies, it definitely feels like this is now opening up what could be a potential, I guess, further and bigger opportunity, as there's now more flexibility for the yards and owners over there to -- or, the yards, in particular, to make some moves?

Yes. I think the big move there will -- the movement of the yen. I mean, imagine book values and a very strong yen created the (technical difficulty) different book value houses. Today, with -- if we could guarantee Japanese owners and yards kind of transaction, and we can -- we have seen it all across Japan. So, a very important source of vessels in the dry bulk is able to -- you are able to do that because of the currency movement, and, I think that even if it remains where it is, there is great ability to do more builds.

Okay, okay. That makes sense. And then, maybe switching gears quickly to a technical question around the dry bulk industry itself, and, Ted, you had laid out, kind of, scrapping, and while we're on a still fairly robust pace, it looks like maybe scrapping could come in at a hair under where we've seen it the last two years, so maybe the weakest out of the last two or three years that we've seen from a scrapping perspective -- absolute tonnage. I know, still, it's a big number, but I guess -- how are we thinking about how this is playing out? You noted that there's a bunch of ships that have been 20 years or younger being scrapped.

Do you -- do we feel like we're maybe towards the, I don't know, middle innings, later innings on the potential for scrapping here, and so, we're -- that might be an indication we're closer to the bottom in rates? I guess I'm just trying to think about how I should be viewing those numbers.

No, I think the last week you've had a -- kind of weak number, in terms of scrapping, but before that, you were averaging numbers that were annualizing closer to $30 million.

Got it.

Now, remember one thing. The new buildings coming in -- it looks like it's going to be 60 million deliveries now instead of what we were estimating at 70 million.

Yes.

So, we're -- at the end of the day, it's all net fleet growth, right, and that's where we're looking at. If you take the 60 million and take away 25 million, you're at 35 million, you're at 5% growth -- net fleet growth, which is equal to about the growth in cargoes, so, the first time in four or five years that this has happened. So, whether you take it from the new end or the old end, the growth is ending of the fleet.

Sure, sure. No, that certainly makes sense, and I guess, if you were -- this is probably a pretty difficult question to answer, but if you're sitting here, thinking about maybe what the magnitude of potential improvements could be in rates -- and maybe not in 2013, because that's very difficult to gauge, but if I were to look out at the '14 and '15, based on where the order book is now and where scrapping kind of goes, how do you feel about the magnitude of rates, relative to maybe some of the 30 year averages that you presented to us? How close -- or, how much can -- how much progress can you make towards some of those numbers?

Chris, when Mike -- I mean, Ted will get you started, but I can tell you when the markets moves, they move very abruptly, and you have a 20 year average includes two similar markets. Don't forget we are five years in the down -- on a downward cycle, and then, you had the late 90s. Beginning of 2000, it was again a low of the market. So, if you have about -- you can have increase of 100% of -- on the Panamaxes, just if you move to the 20 year averages. So, you realize it can be quite a significant movement to your bottom line.

Yes.

Angeliki's right. You consider the S&P value and trade of the commodity, and as any commodity chart will show you, you have tipping points.

Sure.

And things can move rather dramatically. Reversion to the mean could happen rather quickly after any tipping point, which -- second half of the year into next year, it looks quite -- I would say the second half of the year looks healthier. We would anticipate that time charter rates may move way -- well ahead of the spot rates, as people start coming in and seeing the end of the slump, and they would start moving in time for second period and taking S&P. So, let's see what happens on the second half of the year before we (inaudible).

How are shippers thinking about that, when you're talking to them? Obviously, you're not the only person who's kind of suggesting it. Maybe rates could -- are closer to bottoming, and then, maybe you have some upside here. Have you gotten any indication on the shipper's side that there's some anticipation of that? Is anybody kind of offering anything better than what they have over the last six months?

Well, I tell you that the reason you're seeing no longer term deals is because the owners just aren't going to do them.

Yes.

There's plenty of charters lined up to do rates at these levels. That tells --

Okay. Sure. Okay. That makes sense. I guess my last question would just be on the Logistics side, if I could. Just wanted to get a quick update as far as the -- on the port side, kind of development process, anything that's kind of on the next -- I guess, on the next page for the next six or nine months, as far as developing expansion there. Just wanted to get a sense of how that kind of looks.

I think one important thing is that, as per schedule, we're completing the expansion of the base conveyor belt. So this will be operational in Q4, and is -- that is an extremely important -- so, just because you mentioned, you doubled your loading rate. This removes ceiling for our boat and gives us the ability to really more than double our capacity.

The second thing that I like to mention is that we have also -- I mean, at this point, we are 100% of storage capacity -- fully booked for the next five years. So it is always that there is -- will be further expansion in that, because we like to add more clients, and we see the growth there.

Also, one of the things that we very interesting is price is up, and obviously, is a global player in the building. We can see the piles of barges and equipment, where they either can be really short from way of very competitive prices on the level of Argentina, where barges can cost approximately the same as US and actually having a brand new (inaudible). So, we see a lot of growth, and it is inevitable because of -- that we're 100% with capacity now.

Okay, okay. That's very helpful. Thank you very much for the time. I appreciate it.

Thank you.

Thank you.

Urs Dur, Clarkson Capital.

Good morning, good afternoon.

Good morning.

Morning.

I had one question. Ted, you mentioned that two of the charter-in new builds that you have coming have now been delayed. It -- can you -- you said a $7 million per year savings?

$7.3 million, annualized, yes -- $7.3 million. Yes.

And that's going to show up in the -- yes, the time charter revenue line. Okay, good. All right. I'll dig into that a little bit further. The other thing, Ted --

I just wanted to point out, as part of that deal --

Yes.

When we delayed the vessels, we then -- now, are receive -- are -- will be receiving echo type vessels --

Okay.

For very little price -- for very little extra on the charter line.

Okay.

So we think it's a -- it's active deal for us.

Well, okay.

For $200 additional cost per day, we will be getting a 61,000 Japanese Supramax, and for $350, a new echo design Capesize. So this will be -- not only you have the savings of the $7.3 million, as Ted said, on your line, but we are also getting a new echo design vessel later [and much better]. The Capesize will be coming in first half of 2015.

Okay. Good. Yes. No, that's helpful. Thank you very much. The other question I had is you mentioned that possibly, second half of the year, the dry bulk markets get somewhat better, and I generally concur that you have an order book that comes pretty swiftly to a halt, particularly in '14, and then, through '16, it looks like demand growth exceeds supply growth, particularly if you look at historic demand.

But, speaking of the second half of this year, I was wondering if you had any ship classes that you felt might do better than others. For instance, the Cape order book seems to slow down a bit faster than the Panamax and the Supramax. Is there a ship class that you might think do better on the second half of this year?

Well, two things, I think. One is the rising type of [bulletin]. They may just be lifted not evenly, but if you go back to our slide 17, the Chinese iron ore stock piles are at 20 days, which is as low as they've been in many years.

Right.

So, think that they're very good indication that the Capes may enjoy a better half -- second half of the year at a -- and more iron ore be coming from Brazil also, for the second half of the year. So, I think the Capes could lead the way. They usually do.

Yes. Fair enough. South American Logistics that you covered with Chris' question -- a lot of the questions that I had there about the growth and the performance, which exceeded my expectation. They've long since mentioned that you might like to bring it to do an IPO for South American Logistics. I know you're probably not -- can't say anything when it's market condition related, but is there any sort of color? Are you ahead of where you would -- had expected to be?

I mean, it's a big EBITDA growth, year on year, nice seasonal performance, relative to last year. Are you ahead of where you want to be and what you -- and your timing of the possible IPO of South American Logistics?

Urs, I think the IPO is market related, and I think markets are much better, but one thing that I like to mention here -- that we're extremely satisfied with our business is because [I more] than prove to be resilient in any condition. Last year, where you had a lot of problems with the [river], the Company performed very nicely, because you had the minimum guarantees in all segment of our business.

And, in this quarter, where you have the (inaudible) and you have much better conditions on -- so you can have much more cargo down the rivers, we see that we have over 65% increase -- a 62% increase, quarter on quarter, just purely on -- because we didn't adequately personally realize it's too early. A growth shows that we've -- at quarters, we have the guaranteed visibility, and -- as in every part of our business, and now enjoyed the upstart of a better flow down the river.

Right. I appreciate that. I was wondering if you could remind investors about your relative market share on that river system. Granted, it's many different businesses with different cargoes, and you have a port facility and so on, but, say, maybe, in the dry barges and in the wet barges, where do you stack up against your competition?

I know we are number one in the river of all -- in barge, and we are number two with -- if you include grain, and on the port -- independent port, we are number one at the line independent Port of [Paratos].

I think a critical and an important issue on that is that we are running at full capacity on storage, so we -- for the next five years, so it -- so that our expansion that we just completed it last year in October, we are now full contracted. And we need more capacity, so the land we already bought can be in very good use and is something that is -- it totally incremental, and as we are now completed our conveyor belt, we don't have a ceiling. We can double, really, our whole capacity.

That's good.

One thing I'd like to remind is that the first quarter is a seasonally low quarter.

Right.

Second and third quarter, if you follow our results, is the strong quarters. Q1 and Q4 are seasonally low.

Right, which is -- it was a positive result on the EBITDA front for, at least, again, where I had my estimate. Your land you just mentioned again, which is developable -- you own and you can develop. About how fast do you think you can develop it, adding silos and/or conveyor belts and/or port facilities? Can you describe what you might be able to do there and the possible time frame?

We now have very consistent results. On a silo capacity, to add is between three to four quarter marks, from inception to completion, and we can go as fast as three quarters, or the longest it can ever take is four quarters. And on -- if we do an expansion on a pier, for reasonable calculations here, you're looking at about 18 months, period.

Excellent. All right, that's extremely helpful. Thank you for your time today, guys.

Thank you.

Thank you.

Omar Nokta, Global Hunter Securities.

Yes, hi. Good morning. Yes, congratulations on the -- all the interesting things you guys have doing here the past few months. I did want to ask just, on Urs's last question regarding the Felix and the Venus. Those ships were pretty close to being delivered. I would presume that they'd have been launched by now. Are these going to be the same hulls, or are they just completely two separate ships altogether?

They are completely new. The owners wanted to do new echo designs, and they -- we gladly like the change, so we agreed on $350 per day increase on the rate and $200 on the Supramax. So, in essence, we got advantage of getting a better design, newer design, and, on the short-term, having about $7.3 million of less -- of charter-out rate. So this is a net benefit, and let's not forget, annualizing of $7.3 million benefit class. You get delivery of the Capesize in the first half of 2015 and much better, possibly, environment of the day.

Right. Okay. I see. And so, basically, those -- the owner of those has basically negotiated with the yard directly, and those -- the Felix and the Venus that were due this year basically won't exist. Is that right?

Yes.

Okay. All right.

This is not the -- this is a -- we don't go through the shipyard. This is a -- the Japanese owners negotiate with the Japanese yards.

Okay, understood. Thank you. And then, just on the Navios Asia JV, you guys have obviously hit the ground running with the six ships already purchased. Were those actual market purchases, or were those put in the structure by your Japanese partner?

I mean, these, actually, we purchased. I mean, with our -- from our Japanese owner, who created the joint venture. So, in essence, we did -- what is very interesting -- we did, in essence, well, now, we are holding because we participated in 20 vessel growth -- 10 vessels are the dry bulk for ownerships on a joint venture with charters that preexisted, and they have, now, five of the six, and they have also higher rate optional -- in option years (inaudible) ownership. And then, we are then join vessels -- that is, joint venture with -- and then, they -- five containers and five products by the JV with M&A. So, in almost two months, we grew our fleet quite substantially overall.

Yes, absolutely. And have you guys discussed, within that venture, what the end game could be? I know you're consolidating it into your financials. Is this, you think, just a long-term venture, where you'll just receive dividends as the market improves? Or, do you plan or do you think --

Definitely, we will receive dividends, and I think this is during the growth period. If we want, we really -- five, ten -- completed the five, obviously, is quite crazy when being able to capture, not only steal value, but any cash flow. So, I think this is -- now, we see this as an opportunity to grow without a definite -- I mean, doing a ten vessel contractual, which have more contacts into the market, so you're able, really, to grow and also to see via our relationship in Asia, the -- see deal flow that could not be available to focus.

Yes. No, absolutely. And just one final one on the other -- on the HSH venture. Just wanted to get an update to see how that was coming along. Is -- are you -- is that venture -- are you actively looking to sell some ships currently? Or is it more of a wait and see -- you waiting for a few more quarters down the line, or is it something you're planning to do now?

We have additional deals. I mean, we --

I'm sorry. The -- no, just the ten ships that are in the structure, currently, with HSH. Are you actively looking to sell those ships in the current market, or are you going to take a wait and see approach?

We are looking on actually growing this fleet, and we can see -- first of all, the joint venture between -- these ten vessels have positive cash flow, so we see these are the very good opportunity to grow the cash flows and grow the values for some time, and we might even do this fleet of our ships.

Oh, okay. I guess I had just misunderstood. I thought the plan was, with HSH, to actively seek sales of some of these ships, but now, you're actually saying you're thinking of actually growing the -- I know -- I understand you want to do more JV acquisitions of other ships that in distress from the German lenders and whatever. But the ten ships that are currently in the structure -- are those -- you plan to keep them in long-term, or do you see yourself selling?

Of course. I mean, Omar, just go to the actual earnings. I mean, to us, to operate these vessels is quite profitable. We get a preferred return of 12.7%, if you've seen on slide five of the presentation. So, you get very attractive preferred returns. Also, if we (technical difficulty) working capital, we also get preferred returns on that. So, we see a great potential on growing our cash flows. I mean, our market on the container segment is at the low level for time it is recovering, but we see a great potential of a growth on our cash flows that will also contribute to our position.

And secondly, you don't have only the preferred cash flow; you also have 20% on the Navios joint venture gross of any cash flow options that prefer to Navios. So they -- cash flow wise, it makes a lot of sense. On the preferred (inaudible), 20% additional, and there -- if -- when you do the sale, you get -- on top of all the cash flow generation, you get also 20% of the sale of the asset. But it does -- it makes tremendous sense to really operate them and see, maybe, recovery of the market to a more normalized level.

Okay, yes, that's understood. Thanks for that, Angeliki. Thanks a lot. That's all for me.

Thank you.

That does conclude the Q&A portion of today's conference call. I will now return the call to Ms. Frangou for any additional or closing remarks.

Thank you. This completes our first quarter results on Navios Holdings.

Thank you for participating in today's conference call. You may now disconnect.