IQ Ultra Short Duration ETF
Q4 2014 Earnings Call Transcript
Published:
- Operator:
- Welcome and thank you all for standing by. At this time all participants are in a listen-only-mode until the question-and-answer session. (Operator Instructions) Today’s conference is being recorded. If you have any objections, you may disconnect at this time. Now will turn the meeting over to your host Mr. Len Hoskinson, Vice President. Sir, you may now begin.
- Len Hoskinson:
- Good morning, everyone. Thank you for joining us on the call today and welcome to the Ultrapetrol (Bahamas) Limited conference call to discuss the company's fourth quarter 2014 earnings. I would like to remind everyone that this conference call is now being webcast at the company's website, www.ultrapetrol.net. There are also additional materials related to our earnings announcements on our website, including a slide presentation, which forms a part of this conference call. You should be aware that in today's conference call, we will be making certain forward-looking statements to discuss future events and performance. These statements are subject to risks and uncertainties that could cause actual results to differ from the forward-looking statement. For a discussion of factors that could cause results to differ, please see the company's 20-F and press release that were filed yesterday and the company's prior filings with the Securities and Exchange Commission, as well as page two of the slide presentation that shortly follows. We would like to let you know that our fourth quarter results fillings is been delayed, because the time frame for the possibility of the sale of the ocean business has only recently elapsed which delayed the finalization of our 2014 accounts. We intend to release our Q1 2015 results, as usual and about a month’s time from now and accordingly, we will be restricted as to discussing these results on today’s call. Moving forward it’s our intention to follow a more regular reporting schedule. With me today is Damian Scokin, our Chief Executive Officer and Ms. María Cecilia Yad, our Chief Financial Officer. Damien will give an overview of the fourth quarter’s results, his initial assessments of the company and its prospects since becoming our CEO in November of last year. And he will take you through the key areas of focus as we move forward. Cecilia will then take you through the financials and after closing remarks of Damian, we will then be happy to take your questions. And now I hand the call over to Damian.
- Damian Scokin:
- Thanks, Len. Good morning everyone. I’m glad to join you in today’s call and I look forward to taking your questions a bit later on. First though I would like to provide an overview of the fourth quarter to take you through the market environments for each of our businesses and then to give you a better sense of what the company’s strategic priorities will be, as we seek to make a wide arrangement of improvements that we believe will help us to realize the yet untapped potential of Ultrapetrol. Looking to page three, you can see an overview of the fourth quarters result and the subsequent updates. As we announced to you in March, our fourth quarter results were negatively impacted by the increased cost from our efforts to improve pushboats’ reliability and performance. A rating environment in the North Sea also a market that was more depressed than projected and also a now resolved mechanical issue with a container vessel that required extended off-hire. As a result our adjusted EBITDA for the quarter fell short of earlier expectations, bringing our full year 2014 adjusted EBITDA to approximately $57 million at the same time, we have successfully repositioned the UP Opal out of the North Sea and on to an attractive four year attractive contract with Petrobas, while also extending the chartered of our PSB UP Turquoise for an additional four year at the same $30,350 per day that it has been earning previously. Finally in early March the window for hassles to make an offer to purchase the ocean business closed, without an expected bill. Therefore cases option has been terminated. Moving on to Slide 4. You can see our first quarter result broken by each business line. Primarily for the reasons that I just describe as well as the year-over-year decrease in third party purchase sales from our shipyard, our segment results we’re each down in the fourth quarter 2014 from the levels in the fourth quarter 2013. Now turning to page five. I will spend a few moments on the current market dynamics that each of our segments faces and which present it’s unique challenges. In the river business the primary cargos for our dry barges are as you know agriculture product and iron ore. While forecasted growth crops are still expected to see a year over year increase. Soybean prices continue to be at low level, being down 23% in the fourth quarter of 2014 to 2013 levels. Over the same period however iron ore prices have fallen by approximately 45%. Although Ultrapetrol exposure to support iron ore contract is limited in the near term due to our use or take or pay contract. This significantly price decrease in iron ore has of course put pressure on both the spot market and general availability of iron ore transportation contracts. This development if effectively decreasing iron ore transport demand and also adding additional barge capacity in the Hidrovia to compete for our cultural contracts. Overall these scenarios put in further downward pressure on prices for that market. In the off shore supply business as you are fully aware the non-sea off shore market has been hit particularly hard by the rapid and drastic global decrease in crude oil prices. This has resulted in North Sea market facing considerably CapEx pressure and spot rate therefore PSB have suffered. While we had made meaningful progress in shifting vessels out of the North Sea spot market two of our PSBs remains exposed to that difficult market environment. Separately the recent spread of corruption charges at Petrobras, as well as its delayed issuances of financial statement has drawn a great deal of attention to the internal turmoil there. As they reduce the Brazilian ship owner our UP ultra-business has been a considered success in the resilient off shore market. With new contract signing and extensions as recently as March of this year. At the same time we're actively aware of the issue that the Petrobras is facing and we are keeping close eye on developments there. As per the ocean business which operates in the Argentine calabash market. We have seen a recent increase in variable rate while container fitter demand has suffered in line with the showing of Argentine economic activity and foreign exchange restrictions. Now turning to page 6. I would like to outline for you what I consider to be the company's competitive strengths which I believe to be the foundation from which will meet the challenges that I just described. In the river business we have a well-established position as a vertically integrated provider of critical infrastructure to the region’s major economic players. Not only the production of iron and agricultural product. This position includes a market leading fleet of pushboats and barges that is supported by our ownership of ports churn shipment stations and our Punta Alvear ship yard. This extensive footprint enables us to provide a range of integrated services to our customers most of whom engage us on a take or pay contract that give forward visibility on cash flows and offer some type of insulation from the volatility of the agricultural cycle. Similarly, our Parana iron transshipment unit is fully contracted by Vale for three year on -- and on take-or-pay basis. These assets base and contract means has enabled us to maintain a strong competitive position and has provided insulation from seasonality and market volatility. In the off shore supply business our strong relationship with Petrobras has enable us to continue signing and extending multi-year contract for our fleet of PSBs in Brazil with the most recent extensions coming just last month. As a registered Brazilian ship owner our UP off shore is a preferred provider of the Brazilian off shore market. And we have consistently been a best in class operator in that space. As a result of this we have now proven our ability to win contracts for complex high margin business and expect to deliver our converted UP Coral to Petrobras, to commence a 6 year contract and RSB subsea support vessel in June of this year. As per the ocean business we are uniquely positioned to take part in the Argentine calabash, a protected trade. Because of this barrier to entry to for new market participants we enjoy a degree of insulation from market volatility. Additionally, we feel that there are opportunities to pursue additional business in our established feeder container service to cope with the soft demand. As for the Ultrapetrol Organization, we benefit from our long established participation in the market as well as the commercial relationships and industry knowledge that come from those decades if sustained involvement. Furthermore, we receive strong support from our majority shareholders, Southern Cross, which is a leading Latin American private equity firm with extensive experience throughout the region. Now let’s turn to page seven. During my five months as CEO of Ultrapetrol, I have worked to put in place a short-term action plan which is a set of initiatives to effectively face the market challenges and improve the Company’s performance within the next 12 months. In parallel to this effort, we will launch in the strategic review which will define our long term priorities. Each of our businesses has a distinct set of strengths and challenges and as our performance improves we will concentrate on monitoring a number of key performance indicators to track our progress and to ensure that operational improvements translate into concrete financial results. In the real business, we already implemented a more streamlined operational model while also increasing our real time visibility on better performance and cost. This is increasing already our ability to effectively respond to emerging issues and to strengthen our overall operations and customer service. In this way we believe that we will be able to increase our asset utilization, improve transit times and reuse our operational cost spent on transport. In the off shore supply business we continue to seek out opportunities to move out of the volatile spot market and lock in our revenue stream with multiyear contracts at attractive price. We are also looking to continue our already best in class operating performance in the segment particularly by remaining focus on avoiding any unplanned off-hire days. Finally, as can be seen in the awarding of a six year RSV subsea support contract for our UP Coral we are actively seeking out the potential to serve in more complex higher margin business either an RSV subsea support vessel or as a diving support vessel. For the ocean business we are focused on improving our asset utilization by selling some of our underutilized vessels and focusing on maximizing the value of our commercial contracts while minimizing risk by chartering vessels on variable charters on a back to back basis. We are also looking at ways to increase demand for our established feeder container services while seeking to minimize on plan of hired days. Making all this change happen in an effective manner require a more robust organization. That is why on the organization front we are focusing on reinforcing our management capabilities and skills at all levels of the company and systematizing all aspects with the Ultrapetrol, on shore and underwater operations. This involves among other things simplifying certain organizational structures and enhancements and integration of management system. More importantly we are working on developing and installing a new corporate culture focus on accountability, efficiency and customer service which we expect to translate into improvements throughout Ultrapetrol. To assist in this process we have hired a new group human resource director as well as an operational controller for the business -- for the real business. With that I will now provide a more in depth update in our river and long term segment through the early part of 2015 and beyond. Starting with the river business on page eight. As I mentioned earlier the commodity markets for agriculture products and iron ore which you can see across the graph on the bottom half of this slide present a complex market environment for river transportation. Particularly as a depressed iron ore market drives more barges tonnage -- more barge tonnage to compete for agricultural contracts. Looking more specifically at Ultrapetrol we’re pursuing operational improvements along a number of fronts. The most visible of which is our ongoing transition from a complex hub-and-spoke system the more streamline dedicated convoy system that puts less stress on our network and should increase reliability while also increasing our asset turnover. While this transition is still in its early stages we are already seeing some early indications of improvement in asset utilization cost per ton transported and transit time. As I mentioned a moment ago we’re putting in better system that allowing us to more closely track the performance of our vessels and to improve our ability to actively manage our overall fleet. In the Punta Alvear Shipyard, our expectations is that the recently implemented double hull relation for tank barges will drive demand for third-party orders beyond our normal expectations for Hidrovia fleet attrition due to ageing. On page nine, you can see the recent developments in our offshore supply business. As I said earlier and as it has been widely reporting the significant decrease in global overall prices has put down pressure on offshore markets globally, not least of all in the North Sea. Additionally, while the current situation at Petrobras has been a source of considerable noise and asymmetry in the media and in certain sectors our expectations are that these will soon establish somewhat with publication of their audited financials before the month end. In the meantime our interactions with Petrobras was in daily operations and in the chartering of additional vessels has continued to be business as usual. In recent months, we have continued to sign multiyear contract with Petrobras at rates at or above $30,000 per day. With the UP Opal repositioning from the depressed North Sea market to a $30,000 per day assignment with Petrobras beginning in January of this year and the UP Turquoise seamlessly transitioning from its existing contract to a four year extension at a consistent rate of $30,350 per day. Petrobras has also formally awarded our UP Coral with six year contract to operate as an RSV subsea support vessel. That conversion process is clearly been finalized and we expect the vessel to sale to Brazil next week and to commence its charter in June 2015 earning $85,000 per day and portion of which goes to a JV partner who will operate the submarine launch from the UP Coral. Given after this fleet, we expect the UP Coral that the UP Coral will contribute approximately 10 million to our annual EBITDA twice the pro forma average for a standard VSP. Looking forward, we expect Petrobras to increase demands for subsea support vessels over the next 24 months and our strong relations and status as a local Brazilian operator and track record of operating performance position as well to compete for further complex high margin contracts. While also actively evaluating the opportunities that exist to redeploy our remaining two North Sea PSVs out of that market. On page 10, you can see our long-term contractual employment by vessel. This made a point that I would like to highlight here is that with multiyear fix rate contract in place for all but two of our vessels, our outlook is highly stable and predictable despite the volatility in global oil market. Our revenue streams are largely locked in place and we have continued to find the potentates to expand that portion of the revenue stream that is locked in. Additionally, as I mentioned, we expect subsea support vessels demand to increase though there is potential for additional contracts to service those needs, either as an RSV or as a different type of subsea support vessel. With that I will hand the call over to Cecilia for review of the financials starting with the slide 11.
- María Cecilia Yad:
- Thanks Damian. Here is a condensed version of the company’s balance sheet as of 31, December 2014 versus 31, December of 2013. At 31, December 2014 you can see that we have 35 million in cash and cash equivalents. In 2014 we made new investments, this is CapEx for 52 million in our various ongoing project in our river business which include the shipyard barges built for our self during 2014 and include 4.6 million in PSVs in addition primarily due the investments in our PSVs related to the down payment that we have made with our UP Coral and additional PSVs pair mainly for the UP Coral, UP Agate and UP Opal. Over the course of 2014 we reduced our year-end total financial debt by 32.4 million, from [408] million to 466 million in 2014. On the Slide 12 you can see we are showing our current debt repayment schedule. For 2015 we are showing debt repayment of about 32.3 million and effort are underway to smooth out the balloon payment that falls due on a specific off-shore business segment loans in 2016 and 2017 and you can see here in this schedule we are presenting. I can tell you that we are in compliance on all of our old financial covenants and our banks loans and we expect to remain so going forward. With that I would like to turn the call back to Damian.
- Damian Scokin:
- Thanks Cecilia. Just wanted to thank you very much for joining us on the call today and giving us the opportunity of sharing with you some of our views and comments on the 2014 results and the development in our early 2015. We will be glad at this time to take your questions.
- Operator:
- Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question came from the line of Mr. Ben Nolan of Stifel. Sir, you may now begin.
- Steven Tittsworth:
- This is actually Stephen Tittsworth in for Ben Nolan. Just had a couple questions about the offshore business with the recent awards from Petrobras. I was wondering if the UP Coral, UP Opal, was that related to the recent tender Petrobras had for -- in new PSVs.
- Damian Scokin:
- No. You are asking if the UP Coral and UP Opal are involved in the most recent tender of Petrobras?
- Steven Tittsworth:
- Correct.
- Damian Scokin:
- That’s not the case. They have been awarded in the past; there is an open bidding in Petrobras an open billing process that has not been decided yet. So, I’m not sure if you are referring to that.
- Steven Tittsworth:
- Yes. That’s what I’m referring to. Thank you. And my next question has to do with CapEx, I was wondering if you can give me any kind of guidance in terms of how we should think about CapEx moving forward in the 2015 and 2016?
- María Cecilia Yad:
- Yeah. I can comment about the CapEx for 2015. We filled some financing activities in our 20-F for 2014 and we are seeing there that our CapEx for 2015 will be around $30 million, which includes let’s say $5 million for the river another $5 million for our PSVs and mainly spares and then we are thinking about $15 million for our shipyard in order to be barges and we are putting them as a CapEx in case that we don’t -- we are not able to sale them to third parties so in this case we keep this barges for our self. And then you should consider $10 million in addition for dry docks, which is more or less our current level of investment that we make on yearly basis.
- Steven Tittsworth:
- Okay, perfect. And that is all my questions. Thank you for your time.
- Operator:
- Thank you. And our next question came from the line of Mr. Michael Schlembach of JPMC. Sir, your line now is open.
- Michael Schlembach:
- Hi, good morning. Thanks for taking question. One I have a few, when did the Opal begin its contract?
- María Cecilia Yad:
- The Opal commence into operations in January 2015.
- Michael Schlembach:
- Okay. So when we see first-quarter numbers, there should be some benefit from the Opal providing a little bit of help for that -- for the offshore supply business?
- María Cecilia Yad:
- Yes mainly from February and March. Because the Opal have started late in January.
- Michael Schlembach:
- Okay. And then what percentage of revenue in 2014 in the river business was from take or pay contracts?
- María Cecilia Yad:
- I would say that it’s 30% of the revenue from the river business was from the take or pay contracts, if you relate to the value contract.
- Michael Schlembach:
- And should -- will it be higher or lower do you think in 2015?
- María Cecilia Yad:
- We expect to be higher because in 2014, we don’t have a choice amount for those contracts, we have started late in the year for the Parana Iron that you know trans-shipment, going 2015 you should expect the higher revenue from those contract.
- Michael Schlembach:
- Thank you very much. And then with regard to some of the -- we are talking about potential -- I appreciate some of the forward vision out a few more years, but focusing sort of just on like this year, what are the execution goals for this year in terms of EBITDA and cash flow? I mean what -- how are you measuring yourself? What will you consider a success? What will you consider a baseline?
- María Cecilia Yad:
- I’m sorry could you repeat please?
- Michael Schlembach:
- Yes, I just said I appreciate the dialogue on forward potential in the business and Damian's vision. I very much appreciate that. But when you are talking about potential for this year, what is the baseline for 2015 EBITDA? What would you consider to be a success and from there, on which to build?
- María Cecilia Yad:
- Yeah. That we don’t make public this formation, what I can refer is when we presented our Q3 result, we gave you some guidance for the future and our aim from two to three years from now with an EBITDA within 120 million and 130 million. So from on there I can tell you that then if have found that we will be able to sell barges to third parties. And then we succeed in all the initiative that Damian mentioned about the river business. You should think about in this number from two three years from now.
- Michael Schlembach:
- Okay, so if in two to three years, we're talking about doing $120-odd million in EBITDA, I mean, is it relatively linear, the growth you expect from 57 to there? I mean is it fair to say, okay, we think you're going to be achieving certain percentages of the goals, and so one-third of that growth is something you'd expect to see during the course of 2015 from the business? Or is that unfair?
- Damian Scokin:
- Actually if you consider current markets situations and that the improvement process over launching will take some time until driving some ground. I do not expect that to be linear.
- Michael Schlembach:
- And then lastly just with respect to liquidity you guys have 35 million in cash. And then what are your other sources of liquidity on drawing credit line and things like that?
- María Cecilia Yad:
- Today we are projecting for 2015 is to be cash positive. You that at our CapEx not commented so we will invest. On figuring and we are progressing on the EBITDA numbers mainly from the rivers. So by having not commented the CapEx and then we are suggesting to how a 2015 positive cash flow. On the other hand we are discussing with our bank in order for us to refinance our full overall off shored fleet which today it is unleveraged. So we have some room to work with the bank in order for us to get better refinancing conditions. And from there to talk -- to reduce our monthly payments of interest and capital.
- Michael Schlembach:
- And if I had to refinance entire -- go ahead sorry.
- Len Hoskinson:
- Just to say you that the revolver that we have in place is still there it's undrawn.
- Michael Schlembach:
- And what's the dollar amount of that.
- Len Hoskinson:
- Flat 30 million.
- Michael Schlembach:
- And then if you were to refinance the offshore supply debt. Is that sort of most of all of the non-bond debt in the structure? So with the like $466 million of total debt at year end it's everything --.
- Len Hoskinson:
- What we have Mike in the debt structure of the company. As you rightly pointed out we got the bond, 225 million. We also got the IFC debt -- IFC in [outfit] which finances some of the river. So the offshore debt is that we're talking about refinancing. This is below specifically attached to 13 of the 14 vessels in the fleet. That’s about 165 million today. When we say refinancing an overall comment would be that even on valuation that the banks have recently given us. This is not our evaluation they’ve gone out to reputable -- two reputable set of bulkers in Norway, who are about 30% leveraged today. That is current outstanding versus vessel value without taking into account and value of charters. So the balance sheet is looking particularly good and as Cecilia said we started negotiations -- discussions -- it’s not negotiations yet, discussions with our bank group, probably expand that bank group also and for which we've had favorable indications. And we issue of course at the moment because we have some late vessels on charter to Petrobras, we are not going to push forward to this until the financial statements are out.
- Michael Schlembach:
- Sure, that's understandable. And I guess my final question would be, if you do obtain a refinancing that is slightly ahead of current LTVs, what would the Company's intent to be with the increased cash proceeds from that? Does that just sit on the balance sheet for some liquidity? Or is it -- what would the likely use of funds be there?
- Len Hoskinson:
- It's refinancing for considering future strategic objectives. There is no particular use in mind today. Time has taught us to refinance, get bank financing in place it’s not -- in the day it used to be within the month. It's not that way anymore so we're just taking our time. The reason for the refinancing is the 2016 and 2017 blue payments that we have on outcome of our loans and just basically trying to anticipate that and take our time and first priority to smooth that out and some push back.
- Michael Schlembach:
- Thank you very much. And I look forward to talking to you on the 1Q call.
- Operator:
- And our next question for you is from the line of Mr. Douglas Karson of Bank of America. Sir your line now is open.
- Douglas Karson:
- I had one or two questions on the balance sheet, then maybe a little more on the river business. It looks like you have, from the slide deck, [$30-some-odd] million of debt coming due in 2015. Is the refinancing you are proposing going to satisfy that [$30-some-odd] million increment?
- Len Hoskinson:
- That’s a 2015 installment the way that this things works probably is that it’s not going to conclude until second half of the year, so the second half of the year installments will be taken into account when we redo the refinancing limited to offshore.
- Douglas Karson:
- Okay, so maybe half of that, then?
- Len Hoskinson:
- Offshore repayments I think for all of 2015 in a region of 22 million. And I figure you see some includes in the IFC and the [OP] debt for UABL.
- Douglas Karson:
- Yes. I mean I will take it up off-line maybe afterwards, but the free cash flow, either with the $35 million CapEx and interest payment, if EBITDA is kind of anywhere close to where it is now, it seems that there is kind of a little bit tightness of liquidity here with these bonds coming due, and $35 million of cash from the balance sheet.
- María Cecilia Yad:
- You are right but then if you recall what Damian mentioned during the call we are putting all our focus on improving the river and we still have a higher EBITDA than we have in 2014. Also you need to consider that we will have a UP Opal, a full year impact in 2015 being in Brazil you remember that during 2014 was in the North Sea but then with the depressed rates there negatively impacted the numbers from offshore and also you will have starting in June 2015 the UP Coral as a RSV which you may recall this is double EBITDA than the current PSV. So in other words you should expect higher EBITDA result for 2015 when comparing to 2014.
- Douglas Karson:
- Right. Okay, if I could just maybe change gears to the river business just a bit. If you can kind of refresh me, how many boats do you currently have in the fleet? And giving us a sense of like what the utilization was on those? Because it looks like away from selling new boats, you are not making money in that business.
- Damian Scokin:
- We currently have 33 pushboats, if that’s what you are referring in your question. And on the river transport operation by itself given that the progress of pushboats and pushboats availability will have 2014, it was a particular barrier for river transportation which means taking away that shipyard that’s why we are focusing all our efforts in turning that optional around and that’s a big source of the EBITDA improvement we are projecting for 2015.
- Douglas Karson:
- Without giving projections, do you have a sense if you're going to be selling more barges to third-party? Because I think that was a big source of revenue last year. And this quarter, I think there was zero sold. I think maybe some timing on that. Is that like a typical cadence to have zero in a quarter and then have a big quarter --?
- Damian Scokin:
- Our expectations regarding the shipyard are that given the new regulatory requirements for double hull tank barges demand should pick up and all we are producing in the shipyard at the moment are tank barges which are for third party sales and also for additional capacity in our own operation given that we expect that part of the business to pick up demand.
- Douglas Karson:
- The double hull, okay.
- Damian Scokin:
- Yes.
- Douglas Karson:
- Is this a new product that you are creating? Or is this something you have created before?
- Damian Scokin:
- We’ve been selling tank of barges with double hull for several years the issue is that as of January 1, 2015, the Paraguayan regulations require that it’s a mandatory type of barge and the Argentine authorities will do that 1st January next year.
- Douglas Karson:
- Right. Well, that's good. That's a good source of demand with that change. All right, well, thank you for my questions. I may have some follow-ups, but I will let someone else get in the queue. I appreciate it.
- Operator:
- Thank you. And our next question comes from the line of Steve Sylvester, Alcentra. Sir, your line is open.
- Steve Sylvester:
- I guess I'm just trying to understand the issues that are in the river business, aside from barge-building, which clearly that third-party demand fell away and might pick up in 2015. But it doesn't sound like you have any orders as of -- through Q1. So, there has got to be some lead-time there. So, you don't seem to have any real demand yet for 2015. So, aside from that, I am just trying to focus on the actual river business. And are the 33 pushboats that you operate operating properly? And from a maintenance standpoint, are you -- is your fleet in pretty good shape? You have got another strong grain season again, and I'm just trying to understand if the river business on a standalone basis, aside from barges, is going to be profitable this year?
- Damian Scokin:
- Okay. Our targets for the river 2015 are aggressive, and our targets demand a profitable operation on transportation only business. On top of that are the trans-shipment unit and time charters with Vale that should build a more robust EBITDA even in the river. But talking about transportation we have as I said 33 pushboats that went under a very thorough revamp program that started in October last year and is actually finish this week with the last of our pushboats leaving our Montagu soon in progress there. So, so far at this moment all our pushboats are operating and after as I said very thorough revamp process. Now we are working on top of that on as I said reducing our turnaround times, increasing our speed of the convoys. And so far, the last three months as we mentioned we’ve seen early indications that this has been achieved by the operation. So we’re showing an increased turnover of our assets, our barges turn around much faster now. So we may even need less assets, both in terms of pushboats and barges than in the past to transport the same amount of tons.
- Steve Sylvester:
- Great, so if you look at sort of Q1 volumes for 2015 versus last year, which had a similar grain season, are you doing as much volume in the first quarter as last year? And are there any obstacles -- meaning are river levels normal? -- All of those sorts of things. Is grain coming down-river at this point on a normal basis?
- Damian Scokin:
- Three things to your question, volumes are roughly the same, transported volumes are roughly the same. The river level is not issue, it has not been an issue so far at all and the talent of the market right now is not so much the volume but the prices which affect us slightly less than the rate of the market, we got -- we have take or pay contract with fixed price in most cases, but we’re totally isolated from that pricing environment.
- Steve Sylvester:
- So there is a pretty strong correlation between grain price and charter rate?
- Damian Scokin:
- Not so much a correlation between grain price and rates but rather the overcapacity of transportation in the river due to iron ore shipments being significantly reduced.
- Steve Sylvester:
- The lower shipments in iron ore are leading to overcapacity in grain? Is that right?
- Damian Scokin:
- That’s exactly the case.
- Steve Sylvester:
- Got you. And I know that you targeted -- or previous management targeted about $8 million in EBITDA from the trans-shipment business. Is that still a real number?
- Damian Scokin:
- We are working towards the number, yes.
- Steve Sylvester:
- Okay. And again, sorry to beat this idea, but the barge business, are you running at full capacity at this point? Or are you doing -- just in terms of the facility itself, is it going -- how is it being run right now?
- Damian Scokin:
- We are running at roughly I would say half our maximum possible capacity. We’re running one shift; we could run two, two and half.
- Steve Sylvester:
- Okay. And, again, on third parties, I mean, do you have -- I mean, what is your degree of confidence that you can ink a few transactions this year? Because I don't think -- except for first quarter of last year, I don't think anything was done in the last three quarters of last year. So it's been a long time since you have had any business in that area, so --.
- Damian Scokin:
- Well, I say is that most of last year was focusing building our own tank barges fleet with double-hull. So that was the strategy at the time, to first make sure we have enough capacity of our own and later on we start focusing on finding third party sales opportunities. Now as I said we’re evenly distributed. We are looking actively for third-party sales. As you know this is far from for a fluid and totally homogeneous market, we are in active conversations; we turn on opportunities, but cannot commit to a certain amount of third party sales.
- Steve Sylvester:
- Okay. And last question, the two remaining PSVs -- so, for me to understand, so are they on their way to the local area to be potentially under contract with Petrobras? Or are they still in the North Sea?
- Damian Scokin:
- They are in the North Sea at the moment, but we are actively marketing those vessels these are both to Petrobras and other areas with better rates.
- Steve Sylvester:
- Okay. Sorry, one more question -- on the ocean business, if I understand this correctly, you are potentially going to sell, if there are buyers, some of your assets and potentially contract-in your ships to fulfill contract needs. Is that right?
- Damian Scokin:
- Yes.
- Operator:
- Thank you. As if this time there are no more questions in queue.
- Damian Scokin:
- Well, thanks to all and goodbye, see you next month with our first quarter call. Take care.
- Operator:
- Thank you. That concludes today’s conference call. Thank you all for participating. You may now disconnect.
Other IQ Ultra Short Duration ETF earnings call transcripts:
- Q2 (2016) ULTR earnings call transcript
- Q1 (2016) ULTR earnings call transcript
- Q4 (2015) ULTR earnings call transcript
- Q3 (2015) ULTR earnings call transcript
- Q2 (2015) ULTR earnings call transcript
- Q1 (2015) ULTR earnings call transcript
- Q3 (2014) ULTR earnings call transcript
- Q2 (2014) ULTR earnings call transcript
- Q1 (2014) ULTR earnings call transcript
- Q4 (2013) ULTR earnings call transcript