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, 2023.
Angeliki Frangou, Chairwoman and Chief Executive Officer of Navios Partners stated, “I am pleased with the results for the second quarter of 2023, in which we reported revenue of $346.9 million and net income of $112.3 million. We are also pleased to report net earnings per common unit of $3.65 for the quarter.”
Angeliki Frangou continued, “The macro environment is challenging. Trade patterns continue to be impacted by the war in Ukraine, China’s anemic economic growth and Western countries pre-occupation with inflation and recessionary risks. Regardless of the shipping sector, there is a great deal of uncertainty about future prospects. We continue to focus on things that we can control, such as reducing our leverage rate and replacing older vessels with younger, more technologically advanced vessels in sectors that provide adequate returns. ”
Fleet update
• Sales YTD
- $242.2 million gross sale proceeds from sale of 13 vessels YTD
- Completed the sale of eight vessels for $160.3 million in Q1 2023
During the first quarter of 2023, Navios Partners sold the Nave Cosmos, the Nave Dorado, the Nave Polaris, the Star N, the Navios Amaryllis, the Jupiter N, the Navios Prosperity I and the Nave Photon, to various unrelated third parties, for an aggregate sales price of $160.3 million.
- Completed the sale of four vessels for $59.6 million in Q2 2023
During the second quarter of 2023, Navios Partners sold the Aurora N, the Navios Anthos, the Navios Libertas and the Serenitas N, to various unrelated third parties, for an aggregate sales price of $59.6 million.
- Completed the sale of one vessel for $22.3 million in Q3 2023
On July 7, 2023, Navios Partners sold the Lumen N, a 2008-built LR1 Product Tanker vessel of 63,599 dwt, to an unrelated third party, for a sales price of $22.3 million.
• Acquisitions YTD
- Acquisition of two newbuilding MR2 product tanker vessels
During the second quarter of 2023, Navios Partners agreed to acquire two newbuilding Japanese MR2 Product Tanker vessels from an unrelated third party, under bareboat contracts. Each vessel is being bareboat-in for ten years. Navios Partners has the option to acquire the vessels starting at the end of year four until the end of the charter period. Assuming the exercise of the option at the end of the 10-year period, the bareboat agreements reflect an implied price of approximately $40.2 million per vessel and an implied effective interest of approximately 7.0%. The vessels are expected to be delivered into Navios Partners’ fleet during the second half of 2026 and the first half of 2027. The closing of the transaction is subject to completion of customary documentation.
- Acquisition of one Kamsarmax vessel
In August 2023, Navios Partners agreed to acquire from an unrelated third party, the Navios Horizon I, a 2019-built Kamsarmax vessel of 81,692 dwt (previously chartered-in) for an acquisition price of $28.0 million. The delivery of the vessel is expected within the third quarter of 2023.
- Delivery of three newbuilding Capesize vessels
In March 2023, April 2023 and June 2023, Navios Partners took delivery of three 2023-built Capesize vessels, the Navios Altair of 182,115 dwt, the Navios Sakura of 182,169 dwt and the Navios Amethyst of 182,212 dwt, respectively.
• Contracted revenue
- $131.3 million contracted revenue agreed in Q2 2023 | $3.3 billion total contracted revenue
Navios Partners entered into new long-term charters which are expected to generate revenue of $131.3 million.
- Two MR2 newbuilding product tanker vessels, agreed to be acquired in Q4 2022, have been chartered-out for a period of five years, at a rate of $22,959 net per day.
- Three MR2 product tanker vessels have been chartered-out for an average period of two years, at an average rate of $21,831 net per day.
Including the above long-term charters, Navios Partners currently has $3.3 billion contracted revenue through 2037.
Financing update
In June 2023, Navios Partners entered into a new credit facility with a commercial bank for up to $107.6 million in order to refinance existing indebtedness of ten vessels. The credit facility: (i) matures three years after the drawdown date; and (ii) bears interest at Secured Overnight Financing Rate (“SOFR”) plus 250 bps per annum.
In June 2023, Navios Partners entered into a new credit facility with a commercial bank for up to $77.8 million in order to refinance existing indebtedness of ten vessels. The credit facility: (i) matures five years after the drawdown date; and (ii) bears interest at Term Secured Overnight Financing Rate (“Term SOFR”) plus 215 bps per annum.
In June 2023, Navios Partners entered into a new credit facility with a commercial bank for up to $62.4 million in order to refinance existing indebtedness of seven vessels. The credit facility: (i) matures three years after the drawdown date; and (ii) bears interest at Term SOFR plus 250 bps per annum.
In June 2023, Navios Partners entered into a new credit facility with a commercial bank for up to $40.0 million in order to refinance existing indebtedness of nine vessels. The credit facility: (i) matures three years after the drawdown date; and (ii) bears interest at SOFR plus 250 bps per annum.
As discussed above, during the second quarter of 2023, Navios Partners agreed to enter into a bareboat-in agreement for two Japanese newbuilding tanker vessels. The total implied amount financed for the two vessels is approximately $62.4 million and the implied effective interest rate is 7.0%. The closing of the transaction is subject to completion of customary documentation.
Cash distribution
The Board of Directors of Navios Partners declared a cash distribution for the second quarter of 2023 of $0.05 per unit. The cash distribution was paid on August 11, 2023 to unitholders of record as of August 8, 2023. 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.
Operating Highlights
Navios Partners owns and operates a fleet comprised of 81 dry bulk vessels, 47 containerships and 47 tanker vessels, including ten newbuilding tanker vessels (six Aframax/LR2 and four MR2 Product Tanker chartered-in vessels under bareboat contracts), that are expected to be delivered through 2027 and 12 newbuilding containerships (ten 5,300 TEU and two 7,700 TEU), that are expected to be delivered through 2025.
Navios Partners has entered into short, medium and long-term time charter-out, bareboat-out and freight agreements for its vessels with a remaining average term of 1.8 years. Navios Partners has currently fixed 70.9% and 43.7% of its available days for the remaining six months of 2023 and for 2024, respectively. Navios Partners expects to generate contracted revenue of $505.9 million and $747.9 million for the remaining six months of 2023 and for 2024, respectively. The average expected daily charter-out rate for the fleet is $25,459 and $29,701 for the remaining six months of 2023 and for 2024, 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, 2023 and 2022. 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 Period Ended | Three Month Period Ended | Six Month Period Ended | Six Month Period Ended | |||||||||
| June 30, 2023 | June 30, 2022 | June 30, 2023 | June 30, 2022 | |||||||||
| (in $‘000 except per unit data) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||
| Revenue | $ | 346,938 | $ | 280,661 | $ | 656,460 | $ | 517,278 | ||||
| Net Income | $ | 112,308 | $ | 118,160 | $ | 211,473 | $ | 203,825 | ||||
| Adjusted Net Income | $ | 102,157 | (1) | $ | 118,160 | $ | 167,872 | (2) | $ | 203,825 | ||
| Net cash provided by operating activities | $ | 133,827 | $ | 142,010 | $ | 228,343 | $ | 147,163 | ||||
| EBITDA | $ | 201,601 | $ | 163,478 | $ | 390,437 | $ | 289,596 | ||||
| Adjusted EBITDA | $ | 191,450 | (1) | $ | 163,478 | $ | 346,836 | (2) | $ | 289,596 | ||
| Earnings per Common Unit basic | $ | 3.65 | $ | 3.84 | $ | 6.87 | $ | 6.62 | ||||
| Earnings per Common Unit diluted | $ | 3.65 | $ | 3.83 | $ | 6.87 | $ | 6.61 | ||||
| Adjusted Earnings per Common Unit basic | $ | 3.32 | (1) | $ | 3.84 | $ | 5.45 | (2) | $ | 6.62 | ||
| Adjusted Earnings per Common Unit diluted | $ | 3.32 | (1) | $ | 3.83 | $ | 5.45 | (2) | $ | 6.61 | ||
| (1) | Adjusted Net Income, Adjusted EBITDA and Adjusted Earnings per Common Unit basic and diluted for the three month period ended June 30, 2023 have been adjusted to exclude a $10.2 million gain related to the sale of four of our vessels. |
| (2) | Adjusted Net Income, Adjusted EBITDA and Adjusted Earnings per Common Unit basic and diluted for the six month period ended June 30, 2023 have been adjusted to exclude a $43.6 million gain related to the sale of 12 of our vessels. |
Three month periods ended June 30, 2023 and 2022
Time charter and voyage revenues for the three month period ended June 30, 2023 increased by $66.2 million, or 23.6%, to $346.9 million, as compared to $280.7 million for the same period in 2022. The increase in revenue was mainly attributable to the increase in the size of our fleet and to the slight increase in Time Charter Equivalent (“TCE”) rate. For the three month periods ended June 30, 2023 and June 30, 2022, the time charter and voyage revenues were affected by $7.5 million and $11.8 million, respectively, relating to the straight line effect of the containerships and tankers charters with de-escalating rates. The TCE rate increased by 0.3% to $23,900 per day, as compared to $23,823 per day for the same period in 2022. The available days of the fleet increased by 20.4% to 13,572 days for the three month period ended June 30, 2023, as compared to 11,269 days for the same period in 2022 mainly due to the acquisition of the 36-vessel dry bulk fleet from Navios Maritime Holdings Inc. (“Navios Holdings”) and the deliveries of newbuilding and secondhand vessels, partially mitigated by the sale of vessels.
EBITDA of Navios Partners for the three month periods ended June 30, 2023 and 2022 was affected by the items described in the table above. Excluding these items, Adjusted EBITDA increased by $28.0 million to $191.5 million for the three month period ended June 30, 2023, as compared to $163.5 million for the same period in 2022. The increase in Adjusted EBITDA was primarily due to a $66.2 million increase in time charter and voyage revenues, partially mitigated by: (i) a $20.3 million increase in time charter and voyage expenses, mainly due to the increase in (a) bunker expenses arising from the increased number of freight voyages in the second quarter of 2023 and (b) bareboat and charter-in hire expense of the tanker and dry bulk fleet; (ii) an $8.6 million increase in vessel operating expenses in accordance with our management agreements, mainly due to the expansion of our fleet; (iii) a $6.3 million increase in general and administrative expenses in accordance with our administrative services agreement, mainly due to the expansion of our fleet; (iv) a $1.7 million increase in direct vessel expenses (excluding the amortization of deferred drydock, special survey costs and other capitalized items); and (v) a $1.3 million increase in other expenses, net.
Net Income for the three month periods ended June 30, 2023 and 2022 was affected by the items described in the table above. Excluding these items, Adjusted Net Income decreased by $16.0 million to $102.2 million for the three month period ended June 30, 2023, as compared to $118.2 million for the same period in 2022. The decrease in Adjusted Net Income was primarily due to: (i) an $18.8 million increase in interest expense and finance cost, net; and (ii) a $27.7 million negative impact from the depreciation and amortization, mainly due to a: (a) $12.3 million decrease in the amortization of the unfavorable lease terms, (b) $12.3 million increase in depreciation and amortization expense and (c) $3.1 million increase in amortization of deferred drydock, special survey costs and other capitalized items, partially mitigated by a: (i) $28.0 million increase in Adjusted EBITDA; and (ii) $2.5 million increase in interest income.
Six month periods ended June 30, 2023 and 2022
Time charter and voyage revenues for the six month period ended June 30, 2023 increased by $139.2 million, or 26.9%, to $656.5 million, as compared to $517.3 million for the same period in 2022. The increase in revenue was mainly attributable to the increase in the size of our fleet and to the slight increase in TCE rate. For the six month periods ended June 30, 2023 and June 30, 2022, the time charter and voyage revenues were affected by $20.5 million and $16.5 million, respectively, relating to the straight line effect of the containerships and tankers charters with de-escalating rates. The TCE rate increased by 1.0% to $22,337 per day, as compared to $22,107 per day for the same period in 2022. The available days of the fleet increased by 22.1% to 27,480 days for the six month period ended June 30, 2023, as compared to 22,497 days for the same period in 2022, mainly due to the acquisition of the 36-vessel dry bulk fleet from Navios Holdings and the deliveries of newbuilding and secondhand vessels, partially mitigated by the sale of vessels.
EBITDA of Navios Partners for the six month periods ended June 30, 2023 and 2022 was affected by the items described in the table above. Excluding these items, Adjusted EBITDA increased by $57.2 million to $346.8 million for the six month period ended June 30, 2023, as compared to $289.6 million for the same period in 2022. The increase in Adjusted EBITDA was primarily due to a $139.2 million increase in time charter and voyage revenues, partially mitigated by: (i) a $42.8 million increase in time charter and voyage expenses, mainly due to the increase in (a) bunker expenses arising from the increased number of freight voyages in the first half of 2023 and (b) bareboat and charter-in hire expense of the tanker and dry bulk fleet; (ii) an $18.6 million increase in vessel operating expenses in accordance with our management agreements, mainly due to the expansion of our fleet; (iii) an $11.9 million increase in general and administrative expenses in accordance with our administrative services agreement, mainly due to the expansion of our fleet; (iv) a $6.4 million increase in other expenses, net; and (v) a $2.3 million increase in direct vessel expenses (excluding the amortization of deferred drydock, special survey costs and other capitalized items).
Net Income for the six month periods ended June 30, 2023 and 2022 was affected by the items described in the table above. Excluding these items, Adjusted Net Income decreased by $35.9 million to $167.9 million for the six month period ended June 30, 2023, as compared to $203.8 million for the same period in 2022. The decrease in Adjusted Net Income was primarily due to a: (i) $41.2 million increase in interest expense and finance cost, net; and (ii) $56.0 million negative impact from the depreciation and amortization, mainly due to a: (a) $26.5 million decrease in the amortization of the unfavorable lease terms, (b) $23.7 million increase in depreciation and amortization expense and (c) $5.8 million increase in amortization of deferred drydock, special survey costs and other capitalized items, partially mitigated by a: (i) $57.2 million increase in Adjusted EBITDA; and (ii) $4.1 million increase in interest income.
Fleet Employment Profile
The following table reflects certain key indicators of Navios Partners’ core fleet performance for the three and six month periods ended June 30, 2023 and 2022.
| Three Month Period Ended June 30, 2023 | Three Month Period Ended June 30, 2022 | Six Month Period Ended June 30, 2023 | Six Month Period Ended June 30, 2022 | ||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||
| Available Days (1) | 13,572 | 11,269 | 27,480 | 22,497 | |||||||||||
| Operating Days (2) | 13,474 | 11,151 | 27,223 | 22,223 | |||||||||||
| Fleet Utilization (3) | 99.3 | % | 99.0 | % | 99.1 | % | 98.8 | % | |||||||
| TCE rate Combined (per day) (4) | $ | 23,900 | $ | 23,823 | $ | 22,337 | $ | 22,107 | |||||||
| TCE rate Drybulk (per day) (4) | $ | 15,715 | $ | 24,721 | $ | 13,346 | $ | 22,311 | |||||||
| TCE rate Containers (per day) (4) | $ | 35,466 | $ | 31,613 | $ | 35,226 | $ | 29,417 | |||||||
| TCE rate Tankers (per day) (4) | $ | 30,947 | $ | 16,391 | $ | 29,664 | $ | 15,864 | |||||||
| Vessels operating at period end | 154 | 128 | 154 | 128 |
| (1) | Available days for the fleet represent total calendar days the vessels were in Navios Partners’ possession for the relevant period after subtracting off-hire days associated with scheduled repairs, dry dockings or special surveys and ballast days relating to voyages. The shipping industry uses available days to measure the number of days in a relevant period during which a vessel is 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 Partners’ 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 efficiency in finding employment for vessels and minimizing the amount of days that its vessels are off-hire for reasons other than scheduled repairs, dry dockings or special surveys. |
| (4) | TCE rate: TCE rate per day is defined as voyage, time charter revenues and charter-out revenues under bareboat contract (grossed up by currently applicable fixed vessel operating expenses) less voyage expenses during a period divided by the number of available days during the period. The TCE rate per day is a standard shipping industry performance measure used primarily to present the actual daily earnings generated by vessels on various types of charter contracts for the number of available days of the fleet. |