PIRAEUS, Greece (


) -- Dry-bulk shipper

Navios Maritime

(NM) - Get Report

appeared to please investors with its second-quarter results and the purchase of two new Capesize ships, both announced on Thursday.

Navios shares were trading midday Thursday at $4.81, up 36 cents, or 8%, on heavier-than-average volume.

The two new 180,000-ton vessels, now being constructed at a South Korean shipyard, are scheduled for delivery in August 2010 and cost Navios about $140 million total. Its strategy has been to buy so-called "distressed assets," or orders for ships in the midst of being built, purchased from troubled shipping outfits who can no longer afford them.

The move underscores the fraught moment the dry-bulk industry is navigating these days, like a ship rolling in a storm's lull.

It's almost a double bind. On the one hand, companies want to take advantage of any potential economic recovery by having as many ships in the water as possible when the rebound occurs. But the very act of bringing more ships into service during such a fragile moment for the global economy will likely depress prices as a supply imbalance blooms.

That very prospect has many dry-bulk players worried for the near-term health of the business.

The good news for Navios, though, is that the company already has long-term charters in place for all its new ships. For the two purchases announced Thursday, the charters run for 10 years at rates of about $29,000 a day. That's well below current spot-market shipping rates for Capesize vessels -- about $40,815 a day, according to the Baltic Exchange's Thursday reading.

Spot rates have been under some pressure lately as China appears to be easing back from its commodity-stockpiling frenzy amid broader questions about the growth prospects of the Chinese economy as a whole, upon which the dry-bulk business depends like a toddler on the hand of his parents.

Because of this volatility, therefore, long-term charters are seen as prudent, because by locking in rates shippers needn't seek jobs for their ships on the spot market. In its earnings release, Navios said it has 99% of its fleet chartered through the end of the year and 81% for 2010.

With the purchase of four Capesize newbuildings in June, Navios will have six huge vessels coming into its fleet through February 2011. The total cost? Some $466 million, funded partly through the sale of convertible preferred shares. Navios said it expects the new boats to bring $60 million in annual earnings before interest, taxes, depreciation and amortization.

Analysts seemed to view Navios's expansion favorably. Cantor Fitzgerald's Natasha Boyden, for instance, raised her price target on the company's shares to $6 from $5.50. In a research note, she wrote that the company's stock "should trade at a premium to its current multiple," adding that Navios will likely use its relatively strong balance sheet position to buy even more ships.

As for its second-quarter financial results, Navios earned $22.1 million, or 21 cents a share. Excluding items, the company's adjusted earnings came to 12 cents a share, topping analysts' estimates by a penny. That compares with a year-earlier profit of $93.4 million, or 84 cents a share.

Revenue plunged 57% to $142.2 million as the company -- and the whole industry -- suffered from the double whammy of fewer fleet-operation days and lower rates.

The company booked its ships, on average, at a rate of $26,684 a day, down 44% from the $47,313 it was able to charge a year ago. Year-over-year declines of that severity have been the norm for all dry-bulker, of course.

Navios's quarterly numbers paralleled those released in the last few weeks from the likes of rivals


(DRYS) - Get Report


Genco Shipping & Trading

(GNK) - Get Report

, and

Diana Shipping

(DSX) - Get Report


-- Reported by Scott Eden in New York

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