Navios Partners, an international owner and operator of dry cargo and tanker vessels, reported its financial results for the second quarter and six month period ended June 30, 2024.
Angeliki Frangou, Chairwoman and Chief Executive Officer of Navios Partners stated, “I am pleased with the results for the second quarter of 2024. Navios reported revenue of $342.2 million and net income of $101.5 million. Earnings per common unit were $3.30 and our net loan to value was 31.6%.”
Angeliki Frangou continued, “We are continuing to invest in our business by purchasing attractive assets. With substantial improvement in net LTV since the end of 2023, we have also been repurchasing units under our $100 million common unit repurchase program. Through August 12, 2024, we repurchased 197,148 units for approximately $9.7 million. When added to dividends, we have returned a total of approximately $12.8 million to our unitholders YTD 2024. Around $90 million remains available under the program. Further repurchases will be subject to a number of conditions, including general market and business conditions, working capital requirements, and other investment opportunities.”
Common unit repurchases
As of August 12, 2024, pursuant to its previously announced common unit repurchase program, Navios Partners repurchased 197,148 common units for aggregate cash consideration of $9.7 million. Accordingly, there are currently 29,987,240 common units outstanding.
Cash distribution
The Board of Directors of Navios Partners declared a cash distribution for the second quarter of 2024 of $0.05 per unit. The cash distribution was paid on August 14, 2024 to unitholders of record as of August 9, 2024. The declaration and payment of any further dividends remain subject to the discretion of the Board of Directors and will depend on, among other things, Navios Partners’ cash requirements as measured by market opportunities and restrictions under its credit agreements and other debt obligations and such other factors as the Board of Directors may deem advisable.
Fleet update
Acquisition of vessels Q2 – Q3 2024 QTD
$501.1 million acquisitions
Acquisition of four newbuilding scrubber-fitted aframax/LR2 tankers for $263.7 million
During the second quarter of 2024, Navios Partners agreed to acquire four newbuilding scrubber-fitted aframax/LR2 tankers of 115,000 dwt, from unrelated third parties, for aggregate purchase price of $263.7 million. The vessels are expected to be delivered into Navios Partners’ fleet during the second half of 2027 and the first half of 2028.
Acquisition of two newbuilding methanol-ready and scrubber-fitted 7,900 TEU containerships for $212.0 million
During the second quarter of 2024, Navios Partners agreed to acquire two newbuilding methanol-ready and scrubber-fitted 7,900 TEU containerships, from unrelated third parties, for aggregate purchase price of $212.0 million. The vessels are expected to be delivered into Navios Partners’ fleet during the second half of 2026.
Acquisition of one Japanese-built ultra-handymax (previously chartered-in) for $25.4 million
In June 2024, Navios Partners declared its option to acquire a 2015-built ultra-handymax of 61,339 dwt, which was previously chartered-in, for a purchase price of approximately $25.4 million (based on the purchased JPY at ~160 USD/JPY and the expected delivery date of the vessel) and is expected to be delivered in the fourth quarter of 2024.
Sale of vessels Q2 – Q3 2024 QTD
$64.6 million gross sale proceeds from sale of three vessels with average age of 16.4 years
In July 2024, Navios Partners agreed to sell two 2009-built MR2 product tankers and one 2005-built post-panamax to unrelated third parties, for aggregate gross sale proceeds of $64.6 million. The sales are expected to be completed during the second half of 2024.
Four newbuilding vessels delivered Q2 – Q3 2024 QTD
In June 2024 and July 2024, as previously announced, Navios Partners took delivery of three 2024-built 5,300 TEU containerships, which have been chartered-out at an average rate of $37,050 net per day for a period of 5.2 years.
In August 2024, as previously announced, Navios Partners took delivery of one 2024-built aframax/LR2 tanker, which has been chartered-out at $26,366 net per day for a period of five years.
$561.0 million contracted revenue agreed Q2 – Q3 2024 QTD; $3.7 billion total contracted revenue
Navios Partners has entered into new long-term charters which are expected to generate revenue of $561.0 million.
Two newbuilding aframax/LR2 tankers have been chartered-out for a period of five years at $27,776 net per day.
Two newbuilding aframax/LR2 tankers have been chartered-out for a period of five years at $28,275 net per day.
Two newbuilding aframax/LR2 tankers have been chartered-out for a period of five years at $28,144 net per day.
Six 4,250 TEU containerships have been chartered-out for an average period of 2.1 years at an average rate of $28,116 net per day.
Two newbuilding 7,900 TEU containerships have been chartered-out for a period of four years at $43,000 net per day.
Including the above long-term charters, Navios Partners has $3.7 billion contracted revenue through 2037.
Financing update
In June 2024, Navios Partners entered into a new reducing revolving credit facility with a commercial bank for up to $95.0 million in order to refinance the existing indebtedness of two of its vessels and to finance part of the acquisition cost of four dry bulk vessels. The credit facility: (i) matures five years after the drawdown date; and (ii) bears interest at Compounded Secured Overnight Financing Rate plus 175 bps per annum for drawn amounts. In June 2024 and August 2024 the aggregate amount of $79.2 million was drawn. The remaining amount of $15.8 million is expected to be drawn during the third quarter of 2024.
Renewal of the management and administrative services agreements
In August 2024, Navios Partners renewed its management agreement (the “Management Agreement”) and its administrative services agreement (the “Administrative Services Agreement,” together with the Management Agreement, the “Agreements”) with Navios Shipmanagement Inc. and its affiliates (the “Manager”) commencing January 1, 2025, for a term of ten years, renewing annually. The Conflicts Committee of the Board of Directors, consisting of independent directors, negotiated and approved the Agreements with the advice of Watson Farley & Williams LLP as legal advisor and KPMG Advisors Single Member S.A. (a member firm of the KPMG global organization of independent member firms) as financial advisor.
The Administrative Services Agreement provides for reimbursement of allocable general and administrative costs. The Management Agreement provides for technical and commercial management and related specialized services based on fee structure, including: (i) a technical management fee of $950 per day per owned vessel; (ii) a commercial management fee of 1.25% on revenues; (iii) an S&P fee of 1% on purchase or sales price; and (iv) fees for other specialized services (e.g. supervision of newbuilding vessels). Fixed fees to be adjusted annually for United States Consumer Price Index. The Management Agreement also allows for stated incentive awards if equity returns exceed 15%, upon the unanimous consent of the Board of Directors of Navios Partners. The Agreements provide for payment of a termination fee, which termination fee for the Management Agreement is equal to the net present value of the technical and commercial management fees charged for the most recent calendar year for the number of years remaining for the Management Agreement, using a 6% discount rate and such termination fee for the Administrative Services Agreement is equal to the costs charged for the most recent calendar year, each as set forth in the latest audited annual financial statements.
Operating Highlights
Navios Partners owns and operates a fleet comprised of 75 dry bulk vessels, 48 containerships and 56 tankers, including 20 newbuilding tankers (14 aframax/LR2 and six MR2 product tanker chartered-in vessels under bareboat contracts), that are expected to be delivered through the first half of 2028, and eight newbuilding containerships (four 5,300 TEU containerships, two 7,700 TEU containerships and two 7,900 TEU containerships), that are expected to be delivered through 2026. The fleet excludes two MR2 product tankers and one post-panamax that are agreed to be sold.
As of August 12, 2024, Navios Partners had entered into short, medium and long-term time charter-out, bareboat-out and freight agreements for its vessels with a remaining average term of 2.1 years. Navios Partners has currently fixed 73.5% and 45.7 % of its available days for the last six months of 2024 and for all of 2025, respectively. Navios Partners expects contracted revenue of $537.6 million and $759.2 million for the last six months of 2024 and for all of 2025, respectively. The average expected daily charter-out rate for the fleet is $26,245 and $28,509 for the last six months of 2024 and for all of 2025, respectively.
EARNINGS HIGHLIGHTS
For the following results and the selected financial data presented herein, Navios Partners has compiled condensed consolidated statements of operations for the three and six month periods ended June 30, 2024 and 2023. The quarterly information was derived from the unaudited condensed consolidated financial statements for the respective periods. EBITDA, Adjusted EBITDA, Adjusted Earnings per Common Unit basic and diluted and Adjusted Net Income are non-GAAP financial measures and should not be used in isolation or substitution for Navios Partners’ results calculated in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).
Three month periods ended June 30, 2024 and 2023
Time charter and voyage revenues for the three month period ended June 30, 2024 decreased by $4.7 million, or 1.4%, to $342.2 million, as compared to $346.9 million for the same period in 2023. The decrease in revenue was mainly attributable to the decrease in the available days of our fleet and the decrease in Time Charter Equivalent (“TCE”) rate. For the three month periods ended June 30, 2024 and 2023, time charter and voyage revenues were positively affected by $2.4 million and negatively affected by $7.5 million, respectively, relating to the straight line effect of the containership and tanker charters with de-escalating rates. The TCE rate decreased by 2.2% to $23,384 per day, as compared to $23,900 per day for the same period in 2023. The available days of the fleet decreased by 0.5% to 13,498 days for the three month period ended June 30, 2024, as compared to 13,572 days for the same period in 2023 mainly due to the sale of vessels, partially mitigated by the deliveries of newbuilding and secondhand vessels.
EBITDA of Navios Partners for the three month periods ended June 30, 2024 and 2023 was affected by the items described in the table above. Excluding these items, Adjusted EBITDA decreased by $1.7 million to $189.8 million for the three month period ended June 30, 2024, as compared to $191.5 million for the same period in 2023. The decrease in Adjusted EBITDA was primarily due to a: (i) $4.7 million decrease in time charter and voyage revenues; (ii) $2.7 million increase in vessel operating expenses mainly due to the expansion of our fleet and the adjustment of the fixed daily fee in accordance with our management agreements, partially mitigated by the sale of vessels; (iii) $1.1 million increase in other expense, net; and (iv) $0.1 million increase in general and administrative expenses in accordance with our administrative services agreement. The above decrease was partially mitigated by a: (i) $4.9 million decrease in direct vessel expenses (excluding the amortization of deferred drydock, special survey costs and other capitalized items); and (ii) $2.0 million decrease in time charter and voyage expenses.
Net Income for the three month periods ended June 30, 2024 and 2023 was affected by the items described in the table above. Excluding these items, Adjusted Net Income decreased by $8.0 million to $94.2 million for the three month period ended June 30, 2024, as compared to $102.2 million for the same period in 2023. The decrease in Adjusted Net Income was primarily due to a: (i) $10.6 million negative impact from the depreciation and amortization, that primarily resulted from a $6.2 million increase in the amortization of deferred drydock, special survey costs and other capitalized items, a $2.3 million increase in the depreciation and amortization of intangible assets and a $2.1 million decrease in the amortization of unfavorable lease terms; and (ii) $1.7 million decrease in Adjusted EBITDA. The above decrease was partially mitigated by a: (i) $3.2 million decrease in interest expense and finance cost, net; and (ii) $1.1 million increase in interest income.
Six month periods ended June 30, 2024 and 2023
Time charter and voyage revenues for the six month period ended June 30, 2024 increased by $4.2 million, or 0.6%, to $660.7 million, as compared to $656.5 million for the same period in 2023. The increase in revenue was mainly attributable to the increase in TCE rate and the increase in revenue from freight voyages. For the six month periods ended June 30, 2024 and 2023, time charter and voyage revenues were positively affected by $2.5 million and negatively affected by $20.5 million, respectively, relating to the straight line effect of the containership and tanker charters with de-escalating rates. The TCE rate increased by 0.5% to $22,448 per day, as compared to $22,337 per day for the same period in 2023. The available days of the fleet decreased by 1.6% to 27,038 days for the six month period ended June 30, 2024, as compared to 27,480 days for the same period in 2023 mainly due to the sale of vessels, partially mitigated by the deliveries of newbuilding and secondhand vessels.
EBITDA of Navios Partners for the six month periods ended June 30, 2024 and 2023 was affected by the items described in the table above. Excluding these items, Adjusted EBITDA increased by $7.2 million to $354.0 million for the six month period ended June 30, 2024, as compared to $346.8 million for the same period in 2023. The increase in Adjusted EBITDA was primarily due to a: (i) $7.2 million decrease in direct vessel expenses (excluding the amortization of deferred drydock, special survey costs and other capitalized items); (ii) $4.2 million increase in time charter and voyage revenues; and (iii) $1.8 million decrease in other expense, net. The above increase was partially mitigated by a: (i) $4.4 million increase in vessel operating expenses mainly due to the expansion of our fleet and the adjustment of the fixed daily fee in accordance with our management agreements, partially mitigated by the sale of vessels; (ii) $1.3 million increase in general and administrative expenses in accordance with our administrative services agreement; and (iii) $0.3 million increase in time charter and voyage expenses.
Net Income for the six month periods ended June 30, 2024 and 2023 was affected by the items described in the table above. Excluding these items, Adjusted Net Income decreased by $2.2 million to $165.7 million for the six month period ended June 30, 2024, as compared to $167.9 million for the same period in 2023. The decrease in Adjusted Net Income was primarily due to a $21.7 million negative impact from the depreciation and amortization, that primarily resulted from a $11.5 million increase in the amortization of deferred drydock, special survey costs and other capitalized items, a $6.6 million decrease in the amortization of unfavorable lease terms and a $3.6 million increase in the depreciation and amortization of intangible assets. The above decrease was partially mitigated by a: (i) $9.4 million decrease in interest expense and finance cost, net; (ii) $7.2 million increase in Adjusted EBITDA; and (iii) $2.9 million increase in interest income.