Navios Holdings Reports Revenues of $147.2 Million in Q2

Angeliki Frangou

Navios Maritime Holdings Inc., a global seaborne shipping and logistics company, yesterday reported financial results for the second quarter and six month period ended June 30, 2019.

Angeliki Frangou, Chairman and Chief Executive Officer, stated, “I am pleased with the results of the second quarter of 2019 for which we reported revenue of $147.2 million and Adjusted EBITDA of $62.6 million.”

Angeliki Frangou continued, “Charter rates in the dry bulk sector have been robust lately. While NM earned a TCE rate of $10,500 per day for the second quarter of 2019, the capesize 5TC rate is currently over $35,000 per day.”

HIGHLIGHTS – RECENT DEVELOPMENTS

Sale of Ship Management for $20.0 Million and a Five-Year Services Agreement

In August 2019, Navios Holdings sold its ship management division and certain general partnership interests (the “Transaction”) to N Shipmanagement Acquisition Corp. and related entities (“NSM”), affiliated with Company’s Chairman and Chief Executive Officer, Angeliki Frangou. The Company received aggregate consideration of $20.0 million (including assumption of liabilities) and new five-year service agreements under which NSM will provide technical and commercial management services at fixed rates (as described below) and administrative services, reimbursed at allocable cost.

As a result of the Transaction:

The Company is a holding company owning dry bulk vessels and various investments in entities owning maritime and infrastructure assets.
NSM owns all entities providing ship management services and employs all associated people.
The Company will pay a fixed rate of $3,700 per day per vessel, which will cover all technical and commercial management services and operating costs, other than dry-docking and special surveys. This rate will be fixed for a two-year period and will increase thereafter by 3% annually.
NSM will provide all administrative services to the Company and will be reimbursed at allocable cost.
NSM will own the general partner interests in Navios Maritime Containers L.P. (“Navios Containers”) and Navios Maritime Partners L.P.
The Company simultaneously entered into a secured loan agreement with NSM whereby the Company agreed to repay NSM $125.0 million (subject to post-closing adjustment) over a five-year period. Principal amount generally reflects the net amount of liabilities to the entities acquired by NSM. Of the amount owed, $47.0 million will be repayable during the first 12 months in equal quarterly installments, with the remaining principal amount repayable in equal quarterly installments over the following 48 months. In certain cases, amortization can be deferred. The loan agreement provides for interest at 5% annually, and 7% annually for deferred principal amounts.

The closing of the Transaction occurred simultaneously with the execution of the definitive transaction agreements.

The Company’s Board of Directors formed a Special Committee of independent and disinterested directors to consider the Transaction. The Special Committee, with the assistance of its independent financial and legal advisors, exclusively negotiated the terms of the transaction agreements and approved the transaction on behalf of the Board of Directors.

Pareto Securities AS acted as financial advisor and Debevoise & Plimpton LLP acted as legal counsel to the Special Committee.

Fleet Update

From the beginning of 2017 through 2019 YTD, Navios Holdings has decreased by 26% the average age of its owned fleet including long-term bareboat chartered-in vessels.

In August 2019, the Company took delivery of the Navios Herakles I, a newbuilt bareboat chartered-in Kamsarmax of 81,600 dwt.

In August 2019, the Company acquired from an unrelated third party, a previously chartered-in vessel, the Navios Victory, a 2014-built, 77,095 dwt vessel, for a total acquisition price of $14.5 million, which was paid in cash.

In July 2019, the Company agreed to sell to an unrelated third party the Navios Primavera, a 2007-built Ultra Handymax vessel of 53,464 dwt, for a sale price of $10.3 million.

Navios Holdings controls a fleet of 57 vessels (including one vessel agreed to be sold) totaling 6.0 million dwt, of which 31 are owned and 26 are chartered-in under long-term charters (collectively, the “Core Fleet”). The fleet consists of 18 Capesize, 28 Panamax, 9 Ultra-Handymax and two Handysize vessels, with an average age of 7.5 years, basis fully delivered fleet.

As of August 28, 2019, Navios Holdings has chartered-out 90.8% of available days for the remaining six months of 2019, out of which 62.7% are chartered-out on fixed rate and 28.1% on index. The average contracted daily charter-in rate for the long-term charter-in vessels for the remaining six months of 2019 is $13,841 per day.

The above figures do not include the fleets of Navios South American Logistics Inc. (“Navios Logistics”) and Navios Containers and vessels servicing contracts of affreightment.

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

Earnings Highlights

EBITDA, Adjusted EBITDA, Adjusted Net Loss attributable to Navios Holdings’ common stockholders and Adjusted Basic Loss attributable to Navios Holdings’ common stockholders 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 attributable to Navios Holdings’ common stockholders and Adjusted Basic Loss attributable to Navios Holdings’ common stockholders per Share of Navios Holdings (including Navios Logistics and Navios Containers), and EBITDA of Navios Logistics and Navios Containers (both on a stand-alone basis) and a reconciliation of such measures to the most comparable measures calculated under U.S. GAAP.

As of November 30, 2018, Navios Holdings obtained control over Navios Containers and consequently consolidated Navios Containers from that date onwards. Following the Transaction referred above, Navios Holdings will deconsolidate Navios Containers from August 30, 2019 onwards.

Revenue from dry bulk vessel operations for the three month period ended June 30, 2019 was $52.9 million, as compared to $72.0 million for the same period during 2018. The decrease in dry bulk revenue was mainly attributable to the decrease in the time charter equivalent (“TCE”) per day by 10.9% to $10,500 per day in the second quarter of 2019, as compared to $11,791 per day in the same period of 2018.

Revenue from the logistics business was $60.6 million for the three month period ended June 30, 2019 as compared to $60.1 million for the same period in 2018. The increase was mainly attributable to (i) a $4.5 million increase in revenue from the barge business mainly due to an increase in revenue from liquid cargo transportation, (ii) a $2.9 million increase in revenue from the cabotage business mainly due to an increase in operating days of the cabotage fleet and (iii) a $0.3 million increase in revenue from the port terminal business mainly due to an increase in the iron ore port terminal revenue. The overall increase was partially offset by a $7.2 million decrease in sales of products mainly due to a decrease in the Paraguayan liquid port’s volumes of products sold.

Revenue of Navios Containers for the three month period ended June 30, 2019 was $33.7 million. Navios Containers’ results of operations were not included in the Company’s consolidated results of operations for the three month period ended June 30, 2018.

Net Loss attributable to Navios Holdings’ common stockholders was $36.4 million for the three month period ended June 30, 2019, as compared to $25.3 million Net Loss attributable to Navios Holdings’ common stockholders for the same period in 2018. Net Loss attributable to Navios Holdings’ common stockholders was affected by items described in the table above. Excluding these items, Adjusted Net Loss attributable to Navios Holdings’ common stockholders for the three month period ended June 30, 2019 was $4.6 million, as compared to $18.7 million Adjusted Net Loss attributable to Navios Holdings’ common stockholders for the same period in 2018. This decrease in Adjusted Net Loss was mainly due to (i) a $19.4 million increase in Adjusted EBITDA, (ii) a $0.6 million decrease in amortization for deferred drydock and special survey costs, and (iii) a $0.5 million decrease in share-based compensation expense. This overall decrease of $20.5 million was partially mitigated by (i) a $4.8 million increase in depreciation and amortization, (ii) a $1.0 million increase in interest expense and finance cost, net, and (iii) a $0.6 million increase in income tax expense.

Net Income of Navios Logistics, on a standalone basis, was $9.7 million for the three month period ended June 30, 2019 as compared to $4.0 million of Net income for the same period in 2018.

Net Loss of Navios Containers, on a standalone basis, was $3.1 million for the three month period ended June 30, 2019. Navios Containers’ results of operations were not included in the Company’s consolidated results of operations for the three month period ended June 30, 2018.

Adjusted EBITDA of Navios Holdings for the three month period ended June 30, 2019 increased by $19.4 million to $62.6 million, as compared to $43.2 million for the same period in 2018. The increase in Adjusted EBITDA was primarily due to (i) a $15.1 million increase in revenue, (ii) a $10.3 million increase in other income, net, (iii) a $8.8 million decrease in time charter, voyage and logistics business expenses; (iv) a $5.7 million increase in gain on bond extinguishment, and (v) a $0.8 million decrease in net income attributable to noncontrolling interest. This overall increase of $40.7 million was partially mitigated by (i) a $18.6 million increase in direct vessel expenses (excluding the amortization of deferred drydock and special survey costs), (ii) a $2.4 million increase in general and administrative expenses (excluding share-based compensation expenses), and (iii) a $0.3 million decrease in equity in net earnings from affiliated companies.

EBITDA of Navios Logistics, on a standalone basis, was $27.5 million for the three month period ended June 30, 2019, as compared to $22.4 million for the same period in 2018.

EBITDA of Navios Containers, on a standalone basis, was $9.8 million for the three month period ended June 30, 2019.

First Half of 2019 and 2018 Results (in thousands of U.S. dollars, except per share data and unless otherwise stated):
Revenue from dry bulk vessel operations for the six month period ended June 30, 2019 was $105.6 million, as compared to $136.6 million for the same period in 2018. The decrease in dry bulk revenue was mainly attributable to the decrease in TCE per day by 12.0% to $10,045 per day in the first half of 2019, as compared to $11,412 per day in the same period in 2018.

Revenue from the logistics business was $116.4 million for the six month period ended June 30, 2019 as compared to $112.3 million for the same period in 2018. The increase was mainly attributable to (i) a $6.3 million increase in revenue from the barge business mainly due to an increase in revenue from liquid and dry cargo transportation, (ii) a $4.1 million increase in revenue from the cabotage business mainly due to an increase in operating days of the cabotage fleet, and (iii) a $3.2 million increase in revenue from the port terminal business mainly due to an increase in the volumes transshipped in the grain port terminal. The overall increase was partially mitigated by a $9.5 million decrease in sales of products mainly due to a decrease in the Paraguayan liquid port’s volumes of products sold.

Revenue of Navios Containers for the six month period ended June 30, 2019 was $65.5 million and consisted of time charter revenues. Navios Containers’ results of operations were not included in the Company’s consolidated results of operations for the six month period ended June 30, 2018.

Net Loss of Navios Holdings was $41.7 million for the six month period ended June 30, 2019, as compared to $66.1 million for the same period in 2018. Net Loss was affected by items described in the table above. Excluding these items, Adjusted Net Loss of Navios Holdings for the six month period ended June 30, 2019 was $4.4 million, as compared to $52.8 million for the same period in 2018. The $48.4 million decrease in Adjusted Net Loss was mainly due to (i) an increase in Adjusted EBITDA of $59.8 million; (ii) a decrease of $1.3 million in amortization for deferred drydock and special survey costs; and (iii) a $0.8 million decrease in share-based compensation expense. This overall decrease in Adjusted Net Loss was partially mitigated by (i) an increase in depreciation and amortization of $8.5 million; (ii) an increase in interest expense and finance cost, net of $3.6 million; and (iii) an increase in income tax expense of $1.4 million.

Net Income of Navios Logistics, on a standalone basis, was $15.0 million for the six month period ended June 30, 2019, as compared to $2.9 million for the same period in 2018.

Net Loss of Navios Containers, on a standalone basis, was $3.3 million for the six month period ended June 30, 2019. Navios Containers’ results of operations were not included in the Company’s consolidated results of operations for the six month period ended June 30, 2018.

Adjusted EBITDA of Navios Holdings for the six month period ended June 30, 2019 increased by $59.8 million to $131.1 million, as compared to $71.3 million for the same period in 2018. The $59.8 million increase in Adjusted EBITDA was primarily due to (i) a $38.6 million increase in revenue; (ii) a $21.4 million increase in bond extinguishment gains, (iii) a $20.6 million increase in other income, net, (iv) a $10.7 million decrease in time charter, voyage and logistics business expenses; and (v) a $10.5 million increase in equity in net earnings from affiliated companies. This overall increase of $101.8 million was partially mitigated by (i) a $34.7 million increase in direct vessel expenses (excluding the amortization of deferred drydock and special survey costs), (ii) a $6.1 million increase in general and administrative expenses (excluding share-based compensation expenses), and (iii) a $1.2 million increase in net income attributable to the noncontrolling interest.

EBITDA of Navios Logistics, on a standalone basis, was $51.7 million for the six month period ended June 30, 2019, as compared to $39.2 million for the same period in 2018.

EBITDA of Navios Containers, on a standalone basis, was $21.8 million for the six month period ended June 30, 2019.

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