Navios Maritime Holdings Inc. (NM)
Q2 2012 Earnings Call
August 23, 2012 8:30 AM ET
Angeliki Frangou – Chairman and CEO
Ted Petrone – President
Ioannis Karyotis – SVP, Strategic Planning
George Achniotis – CFO
Chris Wetherbee – Citi
Natasha Boyden – Global Hunter
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Good morning and thank you for joining us for this morning’s Navios Maritime Holdings Second Quarter and First Half 2012 Earnings Conference Call. With us today from the company, are Chairman and CEO Ms. Angeliki Frangou; President Mr. Ted Petrone; SVP of Strategic Planning Mr. Ioannis Karyotis; 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 Investors Section of Navios Holdings website, www.navios.com. The copy of the presentation referenced in today’s earnings call can also be found there.
Before I review the structure of this morning’s call, I’d like to read 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 Holdings. Such Forward-looking statements are statements that are not historical facts. Such forward-looking statements are based upon the current beliefs and expectations of Navios Holdings 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 Holdings filings with the Securities and Exchange Commission. The information set forth in this conference call should be understood in light of such risks. Navios Holdings does not assume any obligation to update the information contained in the call. Thank you.
The agenda for today’s call is as follows. First, Ms. Frangou will offer opening remarks; next Mr. Petrone will provide an operational update and an industry overview, Mr. Karyotis will go through an overview including recent financials for Navios South American Logistics, then Mr. Desypris will review Navios Holdings financial results. Lastly, we’ll open the call to take your questions.
I’d now like to turn the call over to Navios Holdings Chairman and CEO, Ms. Angeliki Frangou. Angeliki?
Thank you, Laura, and good morning to all of you who’ve joined us on today’s call. We are pleased to report our results for the second quarter of 2012. We had a solid quarter in a market environment that continues to be challenging. Our dual focus during this difficult time has been undoubtedly control. The efficiency of our global fleet in maintaining a solid balance sheet. As a result, we can continue to return capital to our shareholders through dividend payment and consequently declare efficient dividend for the second quarter of 2012 to shareholders of record on September 18th.
We cannot control the market, but we can in the meantime pay close attention to company specific matters. The failure to pay a very good attention to this matter has put some of our peers in a precarious position. As they are seeking significant liquidity, when capital markets are only open selectively and financial institutions are reducing shipping industry exposure and dollar denominated loan portfolios.
Slide two shows our guidance structure. The value of Navios Holdings play mainly derives from four areas. The drybulk fleet within Navios Holdings and three principal operating subsidiaries. The whole continues to be valued at a less than some of its blocks.
As you can see the value of Navios Holdings interesting to publicly at least its subsidiaries is $2.80 per share. The market values the remaining two businesses at only $0.87 in total. Navios Holdings drybulk fleet consists of 50 vessels in the water. This fleet has long-term charters with creditworthy counterparties that insured with AA rated insurance company in the EU.
Our charted part covers is unique and should continue to provide great comfort, our total stakeholders at us it has done the same historically. The value of Navios Logistics is growing. We have a strong management team addressing the market opportunity. Together we have around four Navios Logistics into a key provider in the Hidrovia Region of South America. Ioannis Karyotis will address Navios Logistics results in further detail later.
Slide 3 shows our strong competitive positioning. As I mentioned a minute ago, we remain in a difficult drybulk market. However, we have focused on what we can control, which is the expense side of our business. We continue to raise the bar on our operational performance and reducing our operating cost. Today, our operating cost which is always favorable when compared to our peers is about 33% below the industry average. At the same time, our fleet utilization is close to 100% over the last three years.
We are also vigilant about our balance sheet, which we believe is one of the best in our industry. Our net debt to capitalization is 50%. This reflects in 1 percentage point reduction in the last six months since the end of 2011. The strength of our balance sheet can also be viewed based, the options of raw material debt maturities until 2017 or CapEx funding requirement. Finally, our balance sheet strength can be seen based on the industry’s position in the market cycle, which we believe is near below.
During the quarter, Navios also accessed debt capital markets but issuing $88 million of add-ons, 8 7/8 notes due in 2017. The add-on notes issued at par eliminated the refinancing risk of $28.5 million otherwise coming due in 2015 also the notes replace bank amortizing debt and that reduced our cash flow breakeven. Not to be ignored, also is the elimination of an LTV covenants, which as we have seen has created instability in other business, as asset values decline in this part of the cycle.