Navios Maritime Acquisition Corporation
Q3 2020 Earnings Call Transcript

Published: 1 Dec 2020

[Operator:]

Thank you for joining us for Navios Maritime Acquisition Corporation's Third Quarter 2020 Earnings Conference Call. With us today from the company are Chairman and CEO, Mrs. Angeliki Frangou; Vice Chairman, Mr. Ted Petrone; and Chief Financial Officer, Mr. Leonidas Korres. As a reminder, this conference call is being webcast. To access the webcast, please visit the Investors section of Navios Acquisition's website at www.navios-acquisition.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 call will also be found there. Now I will review the Safe Harbor statement. This conference call will contain forward-looking statements under the meaning of the Private Securities Litigation Reform Act of 1995 about Navios Acquisition. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are based upon the current beliefs and expectations of Navios Acquisition's management and are subject to risks and uncertainties, which could cause actual results to differ from the forward-looking statements. Such risks are more fully discussed in Navios Acquisition's filings with the Securities and Exchange Commission. The information set forth herein should be understood in light of such risks. Navios Acquisition does not assume any obligation to update the information contained in this conference call.

[Angeliki Frangou:]

Thank you, Doris, and good morning to all of you joining us on today's call. I’m pleased with the results for the third quarter of 2020. During the third quarter, Navios Acquisition reported revenue of $78.8 million and adjusted EBITDA of $37.1 million. Navios Acquisition also declared a quarterly distribution of $0.05 per unit, representing an annual distribution of $0.20 per unit. This represent a reduction from the previous quarter in light of continuing uncertainty, we are determined to preserve cash. Slide 4 present some of the company's highlights. NNA has a 54-vessel fleet that includes 47 diverse tankers and 7 containerships. We intend to sell the 7 containerships. Our fleet had current average age of 9 years. For the last 12 months, Navios Acquisition generated revenue of $374.3 million and adjusted EBITDA of $210.2 million. Since 2019, we reduced our debt by $81.3 million. In addition, our ratio of net debt to adjusted EBITDA improved from 8.6x to 5.3x. While focusing on our balance sheet, we also continued to renew our fleet bareboat charters with no CapEx. Additionally, we have about $500 million in contracted revenue and our chartering strategy continues to protect us from many downside, but also allow us to participate in the market upside. Slide 5 highlights fundamentals of improving market for VLCC vessels as the pandemic subside. A number of vaccines have been announced and effectively counter the coronavirus. Vaccination should propel all forms of economic activity, including oil transportation at a time that the VLCC order book is historically low. VLCCs 20 plus years of age are now equal to 7% of the fleet, and an additional 11% of the fleet will be 20 plus years of age in the next 3 years. For reference purposes, the average age of scrapping has been 20.7 years since 2008. We have a number of other relevant factors. New orders for tankers are affected by continued uncertainty of the future environmental regulation relating to propulsion system, while VLCC ton mile demand is increasing as Atlantic exports fill the refinery capacity expansion in China.

[Ted Petrone:]

Thank you, Angeliki and good morning all. Please turn to Slide 10. Navios Acquisition diversified fleet consists of 47 vessels with an average age of 9 years totaling 6million deadweight. The fleet consists of 14 VLCCs, 10 LR1s, 18 MR2s, 3 MR1 product tankers and 2 chemical tankers. The first of the 4 new VLCC buildings bareboats delivered on October 28 and is charted out to a high quality counterparty for 10-year period at a bareboat rate of $27,816 per day. The remaining 3 VLCC bareboat new buildings are scheduled for delivery in Q1 and Q3 of 2021, but the last one due in 2022. In June 2020, Navios Maritime Acquisition took delivery of 7 container ships at 18,400 TEU capacity following the liquidation of Navios Europe II. The containerships are noncore assets and are held for sale.

[Leonidas Korres:]

Thank you, Ted. I will discuss the financial results for the third quarter and the 9-month period ended September 30, 2020. Please turn to Slide 27. Revenue for Q3 2020 increased by 33.6% to $78.8 million from $59 million in Q3 2019, reflecting a 99.1% fleet utilization and an improved time charter equivalent of $16,870 per day from $15,349 per day achieved in the third quarter of 2019. Time charter and voyage expenses were $2.6 million. Operating expenses were $34 million, and G&A expenses were $4.7 million.

[Angeliki Frangou:]

Thank you, Leo. This concludes our formal presentation, and we will open the call to questions.

[Operator:]

Our first question comes from line of Chris Wetherbee of Citi.

[Chris Wetherbee:]

Hey, thanks. Thanks for taking the question. I guess, really the key question for me is maybe thoughts around the 2021 maturity and on the debt side and what maybe the plans are? I know it's a year out, but obviously it's a big one. So is there any opportunity to continue to chip away at this in advance of, say, the middle of next year or other opportunity to do something more wholesale from a refinancing perspective in the interim?

[Angeliki Frangou:]

Good morning. This is a good question. I mean, we're working on basically in all base. This is a priority maturities. Let's not forget one thing. We have -- let's look at the company. There is a lot of of value from, let's say, the value that we have in NAV on the product tankers, the value we have on the -- on all the vessel which is quite significant. And also we have about $500 million of contracted revenue that is already in our balance sheet. So this is something that we work very much actively. I mean, we brought about -- we do $80 million, we have already organize and raise, refinancing of almost $100 million, $95.6 million subject to the refinancing. So this is things that we are working and we will be working. And think of the fall and the pandemic has been a very -- it hasn't been clear. For oil transportation, it has been very good in the middle of the absolute of the lockdowns and now we are moving to a period where we have found a vaccine. I think when the vaccine comes and we have -- this will create a real economic recovery. And that's why we see that 2021 will provide really support a rebound in the oil transportation when we have low order book and a real economic growth.

[Chris Wetherbee:]

Okay. And then maybe specifically on the assets, can you give us a sense of the fleet? What maybe is unencumbered from a debt perspective you have. Is there a number of assets that have the ability to sort of take on some incremental debt on the asset level?

[Angeliki Frangou:]

I think you have all that there's a difference in NNA's finance you have a lot of information we put in here. So -- and there's all the silence of all of our debt and amortization. So I think you can find all this information in that. Importantly, you have also $0.5 billion of contracted revenue. I mean, with no CapEx is there, 10 years of charters. I mean, quite significant value in all this. And one other action that you shouldn't forget is that we have the containers as we held for sale and there's quite significant value there, but can be sold and create additional ability to buy back. And that is .

[Chris Wetherbee:]

Yes. Okay. That's very helpful. I appreciate that. And then maybe a question on -- please go ahead.

[Angeliki Frangou:]

And one of is that NAV is organized with the tanker there's quite significant value there.

[Chris Wetherbee:]

Okay. Okay. That's helpful. I appreciate the color. On the VLCC side, specifically floating storage, Ted or Angeliki, I don't know what your thoughts are here. You have 96 vessels used for floating storage. How do you see sort of the potential for that to unwind over the course of the next couple of quarters? Where do you think this kind of settles out just given the potential reopening or maybe that's going to be delayed over the course of the next couple of months because we've seen a bit of a second wave here. So how do we think about the unwinding of floating storage over the next couple of quarters?

[Ted Petrone:]

I think the Vs that are in floating storage, if you look at the average age, it's certainly much older than the active fleet. So I kind of consider them almost off side to the market already. I mean, if they come back, they probably go to scrap. And if you have a resurgence in the economy, you may see them unload and then the contango comes back and they reload again. So I really don't see them as being part of the transportation going forward in either factor in either case.

[Chris Wetherbee:]

Okay. Okay. That's helpful. And then one last one on the order book, particularly on the tanker side. What do you think the -- what do you think it takes for owners to get more confident about putting new orders into the order book? I'm not talking about short-term rates. I understand those dynamics. But may be thinking about propulsion systems and ultimately emission standards over the course of the next call decade or maybe even longer than that. What are the types of things that you think people need to see maybe come back into this market and maybe put capital to work, absent like I said, sort of the short-term supply demand fundamentals and the rate.

[Angeliki Frangou:]

I think that because now we really have , which is the propulsion of the vessels is not a kind of questions we are really going to the real subject which is propulsion. We need to see -- I don't think the conversation about long haul propulsion has been resolved. And it need some time. And I think that will take some -- we will get a period. So the combination of -- and that may take at least a couple of years until it is developed and you need another couple of years. But the dual fuel, I don't know if that is the answer. I mean, it's only using about 20% the CO2 emissions, so always things we need to be answered. And with this question and uncertainty of the propulsion, I think this and I will repeat it, because I think an important issue is that we together with all those fleet, let's not forget we have 7% of our fleet over 20 years of age and another 11% coming the next three year. So you have almost an 8% and 18%, almost 20% over aged fleet and it is obviously that the question of the dual fuel with additional cost is not really the answer. I mean, five more fundamental answer on the propulsion. The long haul, I mean, whether this is a short haul, I don't think the long haul has been answered yet. And this uncertainty will provide the opportunity. And let's not forget vaccine and economic growth. Economic activity will create all -- the need for . So you may have a good market revenue generation without an increase in newbuildings.

[Chris Wetherbee:]

Okay. That's very helpful. I appreciate the time. Thank you very much.

[Angeliki Frangou:]

Thank you.

[Operator:]

Thank you. I will now return the call to Angeliki Frangou for closing remarks.

[Angeliki Frangou:]

And thank you. This complete third quarter results.

[Operator:]

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