Navios Maritime Holdings (NM)
F2Q10 Earnings Call
August 19, 2010 8:30 a.m. ET
Angeliki Frangou – Chairman and CEO
Ted Petrone – President, Navios Corporation
George Achniotis – CFO
Jon Chappell – JP Morgan
Natasha Boyden – Cantor Fitzgerald
John Parker – Jefferies
Doug Garber – FBR Capital Markets
Justine Fisher – Goldman Sachs
Previous Statements by NM
» Navios Maritime Holdings Inc. Q1 2010 Earnings Call Transcript
» Navios Maritime Holdings Inc. Q4 2009 Earnings Call Transcript
» Navios Maritime Holdings Inc. Q3 2009 Earnings Call Transcript
Thank you for joining us for this morning’s call. With us today from Navios Maritime Holdings are Chairman and CEO Ms. Angeliki Frangou, President Mr. Ted Petrone, and Chief Financial Officer Mr. George Achniotis.
As a reminder, this conference call is also being webcast. To access the webcast, please go to the investor section of Navios’ web site, www.navios.com, for reference.
Before I review the structure of this morning’s call, I’d like to read the Safe Harbor statement. This conference could 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 the current beliefs and expectations of Navios' management and are subject to risks and uncertainties, which could cause actual results to differ from forward-looking statements. Such risks are more fully discussed in Navios' filings with the Securities and Exchange Commission. The information set forth herein should be understood in light of such risks. Navios does not assume any obligation to update this information contained in this conference call. Thanks.
At this time, I would like to outline the agenda for today’s call. First, Ms. Frangou will offer opening remarks. Next, Mr. Petrone will provide an operational update and an overview of market fundamentals. Following Mr. Petrone's remarks, Mr. Achniotis will review Navios' second quarter 2010 financial results. Finally, Ms. Frangou will offer concluding remarks. At the completion of formal remarks, the company will open the call to take your questions.
At this time, I would like to turn the call over to Navios Holdings Chairman and CEO Ms. Angeliki Frangou.
Thank you and good morning to all of you joining us on today’s call. We continue to benefit from a strategy of fixing the fleet for long-term periods, with quality counter parties. As a result, in the second quarter of 2010 we end almost $91 million over EBITDA and $46.5 million of net income. We also remain one of the few dividend-paying companies in the dry bulk sector, and we once again declared a $0.06 dividend per share for the second quarter of 2010. The dividend is payable on October 6 to stockholders of record on September 22.
The global economy has improved significantly over the past year, driven primarily by healthy industrial production in emerging countries. More recently, developed countries, the OECD countries, are experiencing sluggish growth. This development, coupled with a significant order book, makes us cautious in our outlook. As a result, we are focused on the operating fundamentals of our dry bulk business and on maintaining a healthy balance sheet. We want to be positioned to weather unexpected volatility and take advantage of opportunities.
Now let’s turn to slide 2. Navios has been successful in creating value through its core fleet, as well as through its private and public subsidiaries and affiliates. First, let’s turn to the Navios partners. Navios Holdings owns 31% of Navios Partners, an MLP, trading on the New York Stock Exchange under the symbol NMM.
Navios Partners has grown significantly during the past three years, and today has a market capitalization that is approaching $1 billion. Navios Holdings’ stake is worth over $220 million, and we anticipate receiving almost $22 million in distributions from Navios Partners in 2010.
Next, let’s turn to Navios Logistics. Navios Logistics is a private subsidiary that focuses on South America. It was formed in 2008 and we have a 53.8 ownership stake. Navios Logistics is a key provider of integrated logistics in the Hidrovia region. Core operations include storage and port terminal facilities for grain and liquid products, [unintelligible] transport and a cabotage business.
Today, Navios Logistics is one of the few regional providers offering both wet and dry services, and we are seeking to expand into other related areas such as storage and transshipment of mineral commodities, and we will remain independent financially. We are currently taking active steps to achieve this.
Finally, there is Navios Acquisition, most recently we have spent considerable time and capital in developing Navios Acquisition into a leading tanker company.
As you can see on the bottom of slide 2, and as you turn to slide 3, Navios Acquisition acquired an attractive fleet of product and chemical tankers for $457 million. Today, Navios Acquisition has taken delivery of two LR1 product tanker vessels, each of which is chartered out with a base daily net rate of $17,000, plus 50-50 profit sharing. These charters limit our downside risk to the base rate, and allows Navios Acquisition to enjoy some of the upside volatility through the profit sharing.
The combined EBITDA of these two vessels is approximately $7 million annually, without including any profit sharing. Navios Acquisition also recently announced a transformational acquisition of seven VLCC tankers for $487 million. We believe that Navios Acquisition was able to capture this deal because it was uniquely positioned given the Navios Group’s close relationship with a banking syndicate and a strong balance sheet.
We believe that this transaction is significantly [unintelligible]. The purchase price is $487 million for the seven VLCCs, which [will have] very favorable charter-out coverage averaging 8.8 years. Adjusting for this embedded contract, we arrive at a value of $687 million. Thus, we believe, and [Klaxos?] agrees, that we are paying almost 15% less than the value of these vessels, or a $100 million discount.