Navios Holdings decreases its net loss in 2017

Angeliki Frangou

Navios Holdings, a global, vertically integrated seaborne shipping and logistics company, reported financial results for the fourth quarter and year ended December 31, 2017.

Angeliki Frangou, Chairman and Chief Executive Officer, stated, “I am pleased with the results of the full year and fourth quarter of 2017.  For the full year, we reported revenue and Adjusted EBITDA of $463.0 million and $126.8 million, respectively.  For the fourth quarter, we reported revenue and Adjusted EBITDA of $128.5 million and $46.7 million, respectively.  Rates for dry bulk vessels have improved materially, and in Q4 2017 we began to enjoy the effects of healthier charter markets.”

Angeliki Frangou continued, “We are expanding our fleet capacity and creating market exposure at an opportune time. During the past nine months, we added nine younger vessels (eight kamsarmaxes and one cape) and sold two older vessels, thereby increasing fleet capacity and improving the average age of our fleet by 11%.   We did this using modest capex, as we chartered in the kamsarmaxes, three with favorable purchase options. Also, our chartering strategy created market exposure for 73% of our 22,684 available days in 2018.”

HIGHLIGHTS – RECENT DEVELOPMENTS

Fleet update – Renewal and Expansion

Navios Holdings controls a fleet of 72 vessels totaling 7.3 million dwt, of which 39 are owned and 33 are chartered-in under long-term charters (collectively, the “Core Fleet”). The fleet consists of 21 Capesize, 31 Panamax, 18 Ultra Handymax and two Handysize vessels, with an average age of 7.7 years, basis fully delivered fleet.

Navios Holdings agreed to charter-in eight Panamax vessels, five of which under long term time charters and three of which under bareboat charters with purchase options. In January 2018, Navios Holdings took delivery of the first vessel. The remaining seven vessels are expected to be delivered at various dates though the first quarter of 2020.

In February 2018, Navios Holdings acquired Navios Equator Prosper, a 2000 built 171,191 dwt vessel, previously a chartered-in vessel, for an acquisition price of $10.0 million.

Following the above transactions, Navios Holdings has increased its fleet capacity by 11% and decreased the average fleet age, basis fully delivered fleet, by 11%. In addition, 70% of the chartered-in fleet has purchase options.

As of February 12, 2018, Navios Holdings has chartered-out 65.2% of available days for 2018, out of which 27.0% on fixed rate and 38.2% on index or profit sharing. The average contracted daily charter-in rate for the long-term charter-in vessels for 2018 is $12,952.

The above figures do not include the fleet of Navios Logistics and vessels servicing contracts of affreightment.

Exhibit II provides certain details of the Core Fleet of Navios Holdings. It does not include the fleet of Navios Logistics.

Navios Maritime Partners L.P. (“Navios Partners”)

On February 13, 2018, Navios Partners announced that it has agreed with investors to sell approximately 18.4 million common units for an aggregate of approximately $35.0 million in a registered direct offering at $1.90 per common unit, which includes the sale of approximately $5.0 million of common units to Navios Holdings. The offering is expected to close on or about February 21, 2018.  Following the closing of this offering, Navios Holdings will hold a 20.2% interest in Navios Partners, including the 2% general partnership interest.

Earnings Highlights

EBITDA, Adjusted EBITDA, Adjusted Net Loss and Adjusted Basic Loss per Share are non-U.S. GAAP financial measures and should not be used in isolation or as substitution for Navios Holdings’ results calculated in accordance with U.S. GAAP.

See Exhibit I under the heading, “Disclosure of Non-GAAP Financial Measures,” for a discussion of EBITDA, Adjusted EBITDA, Adjusted Net Loss and Adjusted Basic Loss per Share of Navios Holdings (including Navios Logistics), and EBITDA of Navios Logistics (on a stand-alone basis), and a reconciliation of such measures to the most comparable measures calculated under U.S. GAAP.

Fourth Quarter 2017 and 2016 Results (in thousands of U.S. dollars, except per share data and unless otherwise stated):

The fourth quarter 2017 and 2016 information presented below was derived from the unaudited condensed consolidated financial statements for the respective periods.

Three Month Period Ended Three Month Period Ended  
 December 31,  December 31,  
2017 2016  
(unaudited) (unaudited)
Revenue $ 128,530 $ 99,475
Net Loss $ (51,601 ) $ (242,439 )
Adjusted Net Loss $ (12,580 ) (1 ) $ (27,644 ) (2 )
Net cash provided by/ (used in) operating activities $ 14,370 $ (5,357 )
EBITDA $ 7,669 $ (185,694 )
Adjusted EBITDA $ 46,690 (1 ) $ 29,101 (2 )
Basic Loss per Share $ (0.46 ) $ (1.80 )
Adjusted Basic Loss per Share $ (0.13 ) (1 ) $ (0.28 ) (3 )
(1) Adjusted EBITDA, Adjusted Net Loss and Adjusted Basic Loss per Share for the three months ended December 31, 2017 exclude (i) $36.3 million impairment losses of one vessel and intangible asset and (ii) bond extinguishment losses of $2.7 million.
(2) Adjusted EBITDA and Adjusted Net Loss for the three months ended December 31, 2016 exclude (i) $228.0 million other-than-temporary impairment (“OTTI”) relating to our investments in affiliates and (ii) debt extinguishment gains of $13.2 million.
(3) Adjusted Basic Loss per Share for the three months ended December 31, 2016 exclude items referred in footnote (2) as well as a benefit of $46.6 million following the completion of the Series G and Series H Exchange Program.

Revenue from dry bulk vessel operations for the three months ended December 31, 2017 was $78.6 million as compared to $56.5 million for the same period during 2016. The increase in dry bulk revenue was mainly attributable to (i) the increase in the time charter equivalent (“TCE”) per day by 45.7% to $12,305 per day in the fourth quarter of 2017, as compared to $8,445 per day in the same period of 2016; and (ii) an increase in available days of our fleet by 253 days, mainly due to an increase in long-term charter-in fleet available days.

Revenue from the logistics business was $49.9 million for the three months ended December 31, 2017 as compared to $43.0 million for the same period in 2016. The increase was mainly attributable to (i) a $11.7 million increase in revenue from the port terminal business mainly due to the commencement of operations at the new iron ore terminal and (ii) a $1.3 million increase in revenue from the cabotage business mainly due to an increase in operating days. The overall increase was partially mitigated by (i) a $4.8 million decrease in revenue from the barge business mainly due to the expiration of certain iron ore transportation contracts; and (ii) a $1.3 million decrease in sales of products mainly due to a decrease in the Paraguayan liquid port’s volume of products sold.

Net Loss of Navios Holdings was $51.6 million and $242.4 million for the three months ended December 31, 2017 and 2016, respectively.  Net Loss was affected by the items described in the table above. Excluding these items, Adjusted Net Loss of Navios Holdings for the three months ended December 31, 2017 was $12.6 million as compared to $27.6 million for the same period of 2016. The $15.0 million decrease in Adjusted Net Loss was mainly due to (i) an increase in Adjusted EBITDA by $17.6 million and (ii) an increase in income tax benefit of $2.0 million. This overall increase of $19.6 million was partially mitigated by (i) an increase in interest expense and finance cost, net by $3.6 million; (ii) an increase in depreciation and amortization by $0.8 million; (iii) an increase in amortization for deferred drydock and special survey costs of $0.1 million; and (iv) an increase in share-based compensation expense of $0.1 million.

Net loss of Navios Logistics was $0.2 million for the three month period ended December 31, 2017 as compared to $5.7 million for the same period in 2016.

Adjusted EBITDA of Navios Holdings for the three months ended December 31, 2017 increased by $17.6 million to $46.7 million as compared to $29.1 million for the same period of 2016. The increase in Adjusted EBITDA was primarily due to (i) a $29.0 million increase in revenue and (ii) a $3.3 million decrease in direct vessel expenses (excluding the amortization of deferred drydock and special survey costs). This overall increase of $32.3 million was partially mitigated by (i) a $7.4 million decrease in equity in net earnings from affiliated companies; (ii) a $2.0 million increase in net income attributable to noncontrolling interest; (iii) a $1.9 million increase in general and administrative expenses (excluding share-based compensation expenses); (iv) a $1.9 million increase in other income/ (expense), net; and (v) a $1.5 million increase in time charter, voyage and logistics business expenses.

EBITDA of Navios Logistics was $15.0 million for the three month period ended December 31, 2017, as compared to $7.1 million for the same period in 2016.

Year Ended December 31, 2017 and 2016 Results (in thousands of U.S. dollars, except per share data and unless otherwise stated):

The information for the year ended December 31, 2017 and 2016 presented below was derived from the unaudited condensed consolidated financial statements for the respective periods.

Year
Ended
Year
Ended
 
 December 31,  December 31,  
2017 2016  
(unaudited) (unaudited)  
Revenue $ 463,049 $ 419,782
Net Loss $ (165,910 ) $ (303,823 )
Adjusted Net Loss $ (107,971 ) (1 ) $ (106,130 ) (4 )
Net cash provided by operating activities $ 50,784 $ 36,920
EBITDA $ 68,813 $ (62,827 )
Adjusted EBITDA $ 126,752 (1 ) $ 129,173 (3 )
Basic Loss per Share $ (1.50 ) $ (2.54 )
Adjusted Basic Loss per Share $ (1.01 ) (2 ) $ (1.14 ) (4 )
(1) Adjusted EBITDA and Adjusted Net Loss for the year ended December 31, 2017 exclude (i) $36.3 million of impairment losses of one vessel and an intangible asset; (ii) $14.2 million impairment losses on the sale of Navios Ionian and Navios Horizon; (iii) $4.7 million non-cash impairment losses relating to our affiliates; and (iv) bond extinguishment losses of $2.7 million.
(2) Adjusted Basic Loss per Share for the year ended December 31, 2017 exclude items referred in footnote (1) as well as a benefit of $1.0 million following the completion of the Series G and Series H Exchange Programs.
(3) Adjusted EBITDA for the year ended December 31, 2016 exclude (i) non-cash OTTI losses of $228.0 million relating to our investment in affiliates, (ii) debt extinguishment gains of $29.1 million, (iii) non-cash losses of $8.0 million relating to our share in Navios Partners’ impairment losses; and (iv) a $14.9 million compensation from the early redelivery of a vessel from its charterer.
(4) Adjusted Net Loss and Adjusted Basic Loss per Share for the year ended December 31, 2016 exclude items referred in footnote (3) as well as (i) a $7.3 million income from the write-off of an intangible liability due to the early redelivery of a vessel; (ii) a $13.0 million write-off of intangible assets due to the early redelivery of a charter-in vessel; and (iii) a benefit of $46.6 million following the completion of the Series G and Series H Exchange Program.

Revenue from dry bulk vessel operations for the year ended December 31, 2017 was $250.4 million as compared to $199.5 million for the same period during 2016. The increase in dry bulk revenue was mainly attributable to (i) the increase in TCE per day by 18.1% to $9,705 per day in the year ended December 31, 2017 as compared to $8,220 per day in the same period in 2016; and (ii) an increase in available days of our fleet by 1,525 days, mainly due to an increase in long-term charter-in fleet available days.

Revenue from the logistics business was $212.6 million for the year ended December 31, 2017 as compared to $220.3 million for the same period during 2016. The decrease was mainly attributable to (i) a $22.9 million decrease in revenue from barge business mainly due to the expiration of certain iron ore transportation contracts and (ii) a $4.5 million decrease in revenue from the cabotage business mainly due to a decrease in operating days of the cabotage fleet. The overall decrease was partially mitigated by (i) a $17.2 million increase in port terminal revenue due to the commencement of operations at the new iron ore terminal and (ii) a $2.5 million increase in sales of products mainly due to an increase in the Paraguayan liquid port’s volume of products sold.

Net Loss of Navios Holdings was $165.9 million and $303.8 million for the year ended December 31, 2017 and 2016, respectively. Net Loss was affected by the items described in the table above. Excluding these items, Adjusted Net Loss of Navios Holdings for year ended December 31, 2017 was $108.0 million as compared to $106.1 million for the same period of 2016. The $1.9 million increase in Adjusted Net Loss was mainly due to (i) an increase in interest expense and finance cost, net of $6.1 million; (ii) a decrease in Adjusted EBITDA of $2.4 million; (iii) an increase of $1.0 million in share-based compensation expense; and (iv) an increase of $0.9 million in amortization for deferred drydock and special survey costs. This overall increase was partially offset by (i) an increase in income tax benefit of $4.5 million; and (ii) a decrease in depreciation and amortization of $4.0 million.

Net Income of Navios Logistics was $3.1 million for the year ended December 31, 2017, as compared to $10.2 million for the same period in 2016.

Adjusted EBITDA of Navios Holdings for the year ended December 31, 2017 decreased by $2.4 million to $126.8 million as compared to $129.2 million for the same period of 2016. The $2.4 million decrease in Adjusted EBITDA was primarily due to (i) a $38.8 million increase in time charter, voyage and logistics business expenses; (ii) a $24.1 million decrease in equity in net earnings from affiliated companies; and (iii) a $1.4 million increase in general and administrative expenses (excluding share-based compensation expenses). This overall decrease was partially offset by (i) a $43.2 million increase in revenue; (ii) a $11.5 million decrease in direct vessel expenses (excluding the amortization of deferred drydock and special survey costs); (iii) a $2.9 million decrease in other income/ (expense), net; (iv) a $2.6 million decrease in net income attributable to the noncontrolling interest and (v) a $1.7 million gain on debt extinguishment.

EBITDA of Navios Logistics was $62.5 million for the year ended December 31, 2017, as compared to $68.1 million for the same period in 2016.

Fleet Summary Data:

The following table reflects certain key indicators indicative of the performance of Navios Holdings’ dry bulk operations (excluding the Navios Logistics fleet) and its fleet performance for the three month period and year ended December 31, 2017 and 2016, respectively.

Three Month   Three Month   Year   Year
Period Ended   Period Ended   Ended   Ended
December 31,   December 31,   December 31,   December 31,
2017   2016   2017   2016
(Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
Available Days (1) 5,869 5,616 23,433 21,908
Operating Days (2) 5,845 5,595 23,359 21,742
Fleet Utilization (3) 99.6 % 99.6 % 99.7 % 99.2 %
Equivalent Vessels (4) 64 61 64 60
TCE (5) $ 12,305 $ 8,445 $ 9,705 $ 8,220

 

(1) Available days for the fleet are total calendar days the vessels were in Navios Holdings’ possession for the relevant period after subtracting off-hire days associated with major repairs, drydocking or special surveys. The shipping industry uses available days to measure the number of days in a relevant period during which vessels should be capable of generating revenues.
(2) Operating days are the number of available days in the relevant period less the aggregate number of days that the vessels are off-hire due to any reason, including unforeseen circumstances. The shipping industry uses operating days to measure the aggregate number of days in a relevant period during which vessels actually generate revenues.
(3) Fleet utilization is the percentage of time that Navios Holdings’ vessels were available for generating revenue, and is determined by dividing the number of operating days during a relevant period by the number of available days during that period. The shipping industry uses fleet utilization to measure a company’s efficiency in finding suitable employment for its vessels.
(4) Equivalent Vessels is defined as the total available days during a relevant period divided by the number of days of this period.
(5) TCE is defined as voyage and time charter revenues less voyage expenses during a relevant period divided by the number of available days during the period.

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