Navios Maritime Partners L.P.
Q2 2021 Earnings Call Transcript

Published: 27 Jul 2021

[Operator:]

Thank you for joining us for Navios Maritime Partners’ Second Quarter 2021 Earnings Conference Call. With us today from the company are Chairman and CEO, Ms. Angeliki Frangou; Chief Financial Officer, Mr. Efstratios Desypris; and Executive President of Business Development, Mr. George Achniotis. As a reminder, this conference call is being webcast. To access the webcast, please go to the Investors section of Navios Partners’ website at www.navios-mlp.com. You’ll see the webcast link in the middle of the page, and a copy of the presentation referenced in today’s earnings conference can also be found there. I will now review the Safe Harbor statement. This conference call could contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Navios Partners. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are based upon the current beliefs and expectations of Navios Partners’ management and are subject to risks and uncertainties, which could cause actual results to differ materially from the forward-looking statements. Such risks are more fully discussed in Navios Partners’ filings with the Securities and Exchange Commission. The information set forth herein should be understood in light of such risks. Navios Partners does not assume any obligation to update the information contained in this conference call.

[Angeliki Frangou:]

Thank you, Laura. And good morning to all of you joining us on today’s call. I am pleased with the results for the second quarter of 2021. During the second quarter, Navios Partners recorded revenue of $152 million. Net income of $99.9 million. As you can see on the Slide 4, approximately 56% of our fleet are dry bulk vessels and 44% of our fleet are containerships. Please turn to Slide 5. Navios Partners is a top-10 U.S. publicly listed dry cargo fleet with 98 vessels, of which 55 are dry bulk vessels and 43 are containerships. Our diversified fleet should insulate us from industry cyclicality. You can already see the flexibility created by the different segments as we address open available days and financing. We have about $1.1 billion in contracted revenue. Contracted revenue for the second half of 2021 is expected to exceed the total estimated fleet expenses for the same period by $47.8 million. This enables us to have about 36% of our available days either open or index linked. We have a strong balance sheet with low leverage. Partially as a result of all these factors, our units have performed well in 2021 year-to-date. Slide 6 reviews a recent development. During Q2, NMM gained $90.4 million in EBITDA, $99.9 in net income, and $4.32 earnings per unit. We will continue to renew and expand our fleet. We agreed to acquire in 11 vessels with an average day of 4.8 years for about $552 million and agreed to sell two vessels with an average age of 15.7 years for $41.4 million. As a result of fleet renewal and expansion program year-to-date, we added a net of 44 vessels to our fleet and containership fleet increased by 330%, while average age reduced by 25%. Our drybulk fleet capacity increased by 37%, while its average age reduced by 18%. We raised about $615 million in new financing year-to-date, including $405 million to financing the acquisition. $124.3 million to refinance 2021 maturities and $86 million to refinance other loans. We have a strong cash flow potential for the second half of 2021. We have 15,743 available days with about 36% of our available days are still open or index-linked.

[Efstratios Desypris:]

Thank you, Angeliki. Good morning, everyone. I will briefly review Navios’ financial results for the second quarter and first half ended June 30, 2021. The financial information is included in the press release and summarizing the slide presentation available on the company’s website.

[George Achniotis:]

Thank you, Efstratios. Please turn to Slide 16. The Baltic Exchange Dry Index reached 3,418 on June 29, the highest level since 2010 as earnings from sub Capesize Vessel reached multiyear highs. A 2,793 the Q3 index average was more than doubled any Q2 quarterly average in the past decade. Raise in all asset classes have risen sharply reflecting surging trades driven by strong demand for both major and minor bulk commodities. Supply and demand fundamentals going forward remain extremely positive, a strong demand for natural resources combined with COVID-related logistical disruptions which adds to fleet inefficiencies and the slowing pace of newbuilding deliveries, all support strong level of support and future freight rates. The IMF projects global 2021 GDP growth at 6%, the highest in 50 years, led by an 8.6% expansion in China, India and developing Asia. Accordingly, 2021 drybulk trade is projected to increase by 4% and further increase by 1.7% in 2022. Turning to Slide 17. Demand is forecast to outpace net fleet growth in both 2021 and 2022. The graph on the left shows the drybulk demand for the three major cargoes of iron ore, coal and grain for the second half of 2021 is forecasted to increase by 7% compared to the first half. The graph on the right highlights the previously mentioned slowing fleet growth. Net fleet growth is forecast to be 3.3% this year and only 1.2% for 2022.

[Angeliki Frangou:]

Thank you, George. This completes our formal presentation and we open the call to questions.

[Operator:]

And we'll take our first question from Randy Giveans from Jefferies. Your line is now open.

[Randy Giveans:]

Hi, team Navios. How's it going?

[Angeliki Frangou:]

Hey, Randy. Good morning.

[Randy Giveans:]

Good morning. All right. So a few questions here. I guess, first, just looking at your chartering for the containerships, you recently booked five 4,500 or so TEU containerships on three-year charters. Clearly, very impressive rates about 40,000 a day. Two questions with that. How did you decide on the staggered or maybe step down annual rates structure for that? And then secondly, you have two containerships with charters expiring in December. When do you expect to book new charters on those two?

[Angeliki Frangou:]

Very good questions. I mean, literally see what we have been doing. We are actually with all the repositioning that have done on the company, we are – basically we have created the sizable fleet of 98 vessels and almost a 100. And then we are using the different industry fundamentals that we have to create the optionality on the balance sheet of the company. So, we have 55% drybulk, 45% containerships. So, what we are doing is we paid in cash flows, medium term cash flows on target possibilities and what we are creating with that will give optionality to the company to have support drybulk vessels which we cannot have long-term and create the upside for that. So our goal is to create this long-term durable cash flow with a conservative balance sheet. That is the outlook. And as the maturities, as we see vessels coming close, we will do it in the moment of strength. That is always the way. I mean, let's all be very – what is very important is that we are mindful of our structure and we’re positioning the company for the long-term.

[Randy Giveans:]

Sure. And I guess on those two charters expiring in four months, five months maybe, it seems like there's already a market for those. Are those being negotiated now or are you waiting till the fall?

[Angeliki Frangou:]

We are doing in a portfolio approach. We are always talking to everyone and that is our job. And we will do it in a more appropriate on the line that has the biggest need. So we have done that, I think, in a very good way. And you have seen that last year, I mean, and you can see it on the way we have structured our entire portfolio. We are able to create these cash flows because we will never – we’ve been stepping very quickly and we will do it on the strengthening of the market and we see strengthening of the market.

[Randy Giveans:]

Okay. All right. And then I guess, secondly, you don't mention the ATM results in the press release, but I do see that net cash provided by financing activities was up $258 million. So I guess with that, how much of both the $75 million and then the $110 million ATM programs have been used so far? Is there any remaining? And then what is the current outstanding unit count just for our modeling purposes?

[Efstratios Desypris:]

Hi, Randy, good morning from me also.

[Randy Giveans:]

Hi.

[Efstratios Desypris:]

Yes, we will have all the details on, the number of the units that have issued and the units outstanding as well as the status of the ATM program in our 6K and 8K filing that will come shortly. However, what I can share with you on this call is the fact that practically the ATM’s programs have been practically completed by now, so a very minimal amounts left.

[Randy Giveans:]

Okay, and then assuming $25 or so a share, it seems like that'd be around 6.5 million, 7 million shares. Is that fair on the new share count?

[Efstratios Desypris:]

You will have all the details in the filings. So let's be patient on that.

[Randy Giveans:]

Okay, I'll wait on that. Two more questions. I guess looking at your vessel fleet changes, you've been pretty active in acquiring vessels of late. Do you expect that to continue? Or are you going to focus more on maybe selling some older vessels which you already have done a few here just looking at kind of changes in your fleet going forward?

[Angeliki Frangou:]

This is an ongoing process meaning we will always and we have been, I think, getting good prices on all the fleet. We have disposal of the vessel in a nice order. We have some vessels that – this is an ongoing positioning of the fleet. And also, we have done some new buildings and secondhand position in new buildings. And I think that is needed we have I mean, you can see containership fleet, for example, which is older, so there is more upside into older. So, if we saw an opportunity and we position ourselves to acquire vessels like the – that are very good for the point-to-point transportation like the 5,200 we use. We saw that that fleet is something that the market needs, there is no new orders. And we have been very successful. And we see that the pandemic economy has created the need for this point-to-point transportation. So that is an area where we stepped in, we saw good opportunities, good value, and we went in. Again, we'll be actually financing them via balance sheet in the beginning and then getting the right finance as we foreclose.

[Randy Giveans:]

Got it. Okay. And the last question from me, we're about halfway through the second quarter, can you provide maybe some quarter-to-date rates for your multiple drybulk asset classes with spot exposure or I guess index linked exposure?

[Angeliki Frangou:]

I think you are a better expert than us. Everyone has collections, values, and I will not even compete with you guys. You are very good on that and you can find. I think the one thing that I would like to say is that the company and I think this is an important issue, really positioning the company for the long term. We went through nuclear I mean we saw equity markets close, debt market has been unavailable. I mean in 2019 we had the Term Loan B and basically that was not available for the drybulk. So, we have seen Capesize rate last year being around 8,000 containership, maybe Panamax around 8,000. So basically, the pandemic had a material effect on shipping. So, we have positioned well the company, we saw opportunities, we stepped in, we acquired an MCI that has nicely paid dividends for us. We have seen – it was a nice transaction, we saw over 3.5 times value expansion. So, our goal is to create a long term, a company that has a long-term durable cash flows and to position the company for the long term.

[Randy Giveans:]

Sure. Yes, it seems like second quarter was great. Clearly, the third quarter rate should be better than that. So, we will be looking forward to the next quarter indeed. Thanks so much.

[Angeliki Frangou:]

Yes, but I want to remind you last year, pandemic is still here. And we all should be very mindful of where we are.

[Randy Giveans:]

Yes.

[Angeliki Frangou:]

Thank you.

[Randy Giveans:]

Thank you.

[Operator:]

And we will turn the program back over to Angeliki for any additional or closing remarks.

[Angeliki Frangou:]

Thank you. This completes our Q2 results.

[Operator:]

This does conclude today's program. Thank you for your participation. You may disconnect at any time. And have a wonderful day.