Navios Maritime Partners L.P., an international owner and operator of container and drybulk vessels, reported its financial results for the first quarter ended March 31, 2018.
Angeliki Frangou, Chairman and Chief Executive Officer of Navios Partners stated, “I am pleased with the results for the first quarter of 2018, during which we reported net income of $5.5 million. During the quarter, we reinstated distributions at $0.08 per unit annually, representing an annualized current yield of about 4.0%. Our initial quarterly distribution of $0.02 cents per unit will be payable on May 14, 2018 to unitholders of record as of May 10, 2018.”
Angeliki Frangou continued, “Over the past couple of years, we used our cash flow to solidify our balance sheet and to renew and expand our drybulk fleet. Today we have a 33-vessel drybulk fleet that is larger and younger, on average, than it was only a couple of years ago. We have also used excess cash flow to reduce leverage, extend debt maturities and form a container focused entity that should provide us further upside. Overall, we believe we have established a unique growth platform in the drybulk sector that is capable of generating significant cash flow.”
The Board of Directors of Navios Partners declared a cash distribution for the first quarter of 2018 of $0.02 per unit. The cash distribution is payable on May 14, 2018 to unitholders of record as of May 10, 2018.
Drybulk fleet renewal and expansion
In 2018, Navios Partners agreed to acquire from unrelated third parties:
Two 2006-built Panamax vessels of approximately 74,500 dwt each, the Navios Altair I and the Navios Symmetry, for a total purchase price of $22.0 million. The vessels are expected to be delivered to Navios Partners’ owned fleet during the second quarter of 2018.
A 2005-built Panamax vessel of approximately 87,000 dwt, the Navios Apollon I, for a purchase price of $13.0 million. The vessel is expected to be delivered to Navios Partners’ owned fleet within May 2018.
During 2017 through today, following the above acquisitions, Navios Partners has added a net total of nine vessels in its drybulk fleet, increasing the capacity of the drybulk fleet by 40% and reducing the average age by 12%.
Sale of Vessels
On April 27, 2018, Navios Partners agreed to sell the YM Utmost and the YM Unity, two 2006-built Container vessels of 8,204 TEU each, to its affiliate, Navios Maritime Containers Inc. (“Navios Containers”) for a total sale price of approximately $67.0 million. The transaction was unanimously approved by the Conflicts Committee of the Board of Directors of Navios Partners. The Company is expected to recognize a book loss from the sale of the two vessels of approximately $37.6 million in the second quarter of 2018. The sale is expected to be completed by the end of May 2018.
Private Placement of Navios Containers
On March 13, 2018, Navios Containers closed a private placement of 5,454,546 shares at a subscription price of $5.50 per share, resulting in gross proceeds of approximately $30.0 million. Navios Partners invested $14.5 million and received 2,629,095 shares. Navios Partners also received 370,909 warrants, with a five-year term. Following this transaction, Navios Partners owns approximately 36.0% of Navios Container’s equity.
Long-Term Cash Flow
Navios Partners has entered into medium to long-term time charter-out agreements for its vessels with a remaining average term of approximately 2.0 years. Navios Partners has currently contracted out 72.9% of its available days for 2018, 19.2% for 2019 and 16.2% for 2020, including index-linked charters, expecting to generate revenues (excluding index-linked charters) of approximately $121.7 million, $55.5 million and $65.9 million, respectively. The average expected daily charter-out rate for the fleet is $17,561, $23,706 and $29,992 for 2018, 2019 and 2020, respectively.
Three month periods ended March 31, 2018 and 2017
Time charter and voyage revenues for the three month period ended March 31, 2018 increased by $10.6 million, or 25.1%, to $53.1 million, as compared to $42.4 million for the same period in 2017. The increase in time charter and voyage revenues was mainly attributable to: (i) the increase in revenue following the acquisition of seven vessels in 2017; and (ii) the increase in Time Charter Equivalent rate per day (“TCE”) to $16,108 per day for the three month period ended March 31, 2018, from $14,671 per day for the three month period ended March 31, 2017. That increase was partially mitigated by the decrease in revenue due to the sales of the MSC Cristina, the Navios Apollon and the Navios Gemini S in 2017. The available days of the fleet increased to 3,186 days for the three month period ended March 31, 2018, as compared to 2,794 days for the three month period ended March 31, 2017, mainly due to the increased fleet.
EBITDA for the three month period ended March 31, 2018 was negatively affected by the accounting effect of a $0.6 million equity compensation expense. EBITDA for the three months ended March 31, 2017 was negatively affected by the accounting effect of a: (i) $1.5 million allowance for doubtful accounts; (ii) $1.3 million loss on the disposal due to the sale of one of our vessels; and (iii) $0.5 million equity compensation expense. Excluding these items, Adjusted EBITDA increased by $5.7 million to $31.5 million for the three month period ended March 31, 2018, as compared to $25.9 million for the same period in 2017. The increase in Adjusted EBITDA was primarily due to a: (i) $10.6 million increase in revenue; and (ii) $1.0 million increase in equity in net earnings of affiliated companies. The above increase was partially mitigated by a: (i) $0.3 million increase in time charter and voyage expenses; (ii) $2.3 million increase in management fees due to the increased fleet; (iii) $0.2 million increase in general and administrative expenses; (iv) $2.5 million decrease in other income; and (v) $0.6 million increase in other expenses.
The reserve for estimated maintenance and replacement capital expenditures for the three month periods ended March 31, 2018 and 2017 was $6.1 million and $3.3 million, respectively (please see “Reconciliation of Non-GAAP Financial Measures” in Exhibit 3).
Navios Partners generated an operating surplus for the three month period ended March 31, 2018 of $17.5 million, as compared to $17.6 million for the three month period ended March 31, 2017. Operating Surplus is a non-GAAP financial measure used by certain investors to assist in evaluating a partnership’s ability to make quarterly cash distributions (please see “Reconciliation of Non-GAAP Financial Measures” in Exhibit 3).
Net Income for the three month period ended March 31, 2018 amounted to $5.5 million as compared to a net loss of $5.7 million for the three month period ended March 31, 2017. The increase in Net Income of $11.1 million was due to : (i) an $8.3 million increase in EBITDA; (ii) a $0.1 million decrease in direct vessel expenses; (iii) a $1.9 million decrease in depreciation and amortization expense; (iv) a $0.5 million decrease in interest expense and finance cost, net; and (v) a $0.4 million increase in interest income.