Navios Maritime Holdings, Inc. (NYSE:NM) Q2 2022 Earnings Conference Call September 8, 2022 8:30 AM ET
Company Participants
Daniela Guerrero – IR
Angeliki Frangou – Chairwoman and CEO
Ted Petrone – Vice Chairman
George Achniotis – CFO
Ioannis Karyotis – SVP, Strategic Planning
Conference Call Participants
Operator
Good morning, and thank you for joining Navios Maritime Holdings’ Second Quarter 2022 Earnings Conference Call. We are pleased to host this call from the Cayman Islands.
With us today from the company are Chairwoman and CEO, Ms. Angeliki Frangou; Chief Financial Officer, Mr. George Akhniotis; and SVP of Strategic Planning, Mr. Ioannis Karyotis.
I will turn the call over to Ms. Daniela Guerrero, who will take you through the conference call details and Safe Harbor statements. Daniela?
Daniela Guerrero
Thank you. As a reminder, this conference call is being webcast. To access the webcast, please visit the Investors section of Navios Maritime Holdings website at www.navios.com. You’ll see the webcast link in the middle of the page, and a copy of the presentation referenced in today’s call will also be found there.
Now, I will review the Safe Harbor statement. This conference call could contain forward-looking statements under the meaning of the Private Securities Litigation Reform Act of 1995 about Navios Maritime Holdings. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are based upon the current beliefs and expectations of Navios Maritime Holdings management and are subject to risks and uncertainties, which could cause actual results to differ from the forward-looking statements. Such risks are more fully discussed in Navios Maritime Holdings’ filings with the Securities and Exchange Commission. The information set forth herein should be understood in light of such risks. Navios Maritime Holdings does not assume any obligation to update the information contained in this conference call.
Operator
The agenda for today’s conference call is as follows. We will begin this morning’s conference call with formal remarks from the management team. And after, we will open the call to take questions.
Now I turn the call out to Navios Holdings’ Chairwoman and CEO, Ms. Angeliki Frangou. Angeliki?
Angeliki Frangou
Thank you, Michael, and good morning to all of you joining us on today’s call. I am pleased with our results for the second quarter of 2022.
In the second quarter, Navios Holding reported revenue of $159.2 million, EBITDA of $98.9 million and net income of $45 million. For the six months of 2022, Navios Holdings recorded revenue of $287 million, EBITDA of $172.7 million and net income of $40 million. Most importantly, we sold our dry fleet at a good time and used $835 million of sales proceeds to pay down $784.2 million of debt. George will address how we used these funds to delever our balance sheet.
With the closing of the sale behind us, we have exited fleet ownership and now have two primary investments. The first is a 63.8% ownership interest in Navios South American Logistics, a logistics and infrastructure provider in the Hidrovia region of South America. We can refocus on the opportunity this unique group of assets provide. Ioannis Karyotis will in a moment, drill down on the company. But I will remind you that our primary transshipment asset is located in the tax-free zone in Uruguay at the mouth of the river, which means that water levels are unaffected by the drought.
Our contract with Vale is unaffected by the recent sale of the mine to J&F, and equally important, we believe that J&F will increase its volumes. There is a great deal of other new activity in iron ore mining, which positively affects our operations.
The second investment is a 10.3% ownership interest in Navios Partners. This investment has excellent potential economic returns as the analyst estimated NAV is well above the current market price. We believe that we will also have margin of safety as Navios Partners is a well-diversified maritime company.
I would like now to turn the call over to Mr. George Akhniotis, Navios Holdings CFO, who will take you through the financials. George?
George Achniotis
Thank you, Angeliki.
Please turn to Slide 5 for a review of Navios Holdings’ financial highlights for the second quarter and first six months of 2022. EBITDA for the quarter was $98.9 million, compared to $80.5 million in Q2 of 2021, a 23% increase. The increase is mainly due to a 25% increase in the time charter equivalent rate achieved by the fleet in the quarter and a 48% increase in the results of Navios South American Logistics compared to Q2 of ’21.
The improvement is also reflected in the net income of the company. During Q2 2022, we recorded net income of $45 million compared to $24.9 million in ’21, an improvement of 80%.
Moving to the first half financial highlights, EBITDA for the first half of 2022 was $172.7 million compared to $135.1 million in the first half of ’21, an improvement of 28%. The TCE rate achieved in the first six months of 2022 was 37% higher than in ’21, and the results of Navios South American Logistics were 24% higher than the first six months of ’21.
Net income for the period was $40 million compared to $25.1 million in the first half of 2021. Net income for ’22 includes $24 million upfront fees paid in the form of convertible debenture for the refinancing of the ship mortgage notes in Q1. I would like to point out that with the sale of the fleet, the results of the company will be a little noisy initially and then materially different going forward.
In Q3, we will record a gain from the sale of the fleet and some revenue from charters during the period. However, commencing in Q4, our operating results will not include any revenue from vessels. Instead, they will only include the results from Navios South American Logistics, which has always been consolidated.
Moving to Slide 6 and our balance sheet highlights. As of in 2022, the cash balance was about $55 million compared to about $138 million at the end of December ’21. I want to remind you that at the end of December, $84 million was restricted cash that was deposited with the trustee of the ship mortgage notes in order to facilitate the repayment of the notes in January. Following the repayment of the ship mortgage notes and the partial repayment of the senior secured notes in the first half of the year, our bonds have reduced from $1.1 billion at the end of the year to $584 million at the end of June 2022. In August, we fully repaid the senior secured notes.
Following the sale of the fleet in Q3, the majority of the proceeds were used to delever the balance sheet by reducing debt and other liabilities as follows. $441.6 million bank debt finance lease liabilities and bare boat obligations that have been assumed by Navios Partners; $262.6 million mandatory repayment of loans associated with the manager; and $80 million to fully repay the senior secured notes. The full effect of the sale of the fleet will be more clearly reflected in the Q3 balance sheet and income statement.
Similar to the income statement, the consolidated balance sheet going forward will mainly reflect the balance sheet of Navios South American logistics.
At this point, I’ll turn the call over to Ioannis for his review of the Navios South American Logistics results.
Ioannis Karyotis
Thank you, George. Slide 7 provides an overview of Navios Logistics. Navios Logistics operates three port terminals, which are complemented by our barge fleet for river transportation and product tanker fleet for coastal cabotage trade.
Please turn to Slide 8. The prospects for Navios Logistics have always been good and are improving. The global focus on food security, because of geopolitical tensions is expected to benefit the exports of agricultural commodities from South America. In fact, in the first half of this year, grain exports through our port in Uruguay are 49% higher year-on-year. According to USDA the 2022-’23 South American soybean crop is expected to be even stronger. And more importantly, for our grain terminal, Paraguayan crop that failed this year, is expected to recover.
We also see a revived interest in the exploitation of the mining assets of Corumba in Brazil, which exports through the Hidrovia river system. Vale recently sold its Midwestern system mining assets, which were underutilized for many years to J&F, and production should grow under the new ownership. Meanwhile, Vetria and Cargill continue to export using our port terminal. And this year, we added a third client to our iron ore port terminal, 4B Mining, who started production and exports this year. The increase in iron ore export volumes benefits barge business and our port terminal.
In the last couple of years, low water in the Parana, Paraguay rivers made navigation conditions difficult, affecting the profitability of our barge business. In 2022, so far, the water levels have improved compared to both 2020 and 2021, yet is still below the historical average. Navios Logistics owns unique, well-located, modern infrastructure assets with the capacity to service increased demand from our clients. We also have available land to develop new business in a growing part of the world.
Please turn to Page 9. Q2 2022 EBITDA was $32 million, 48% higher compared to the same quarter last year. Port segment EBITDA grew 34% to $24.5 million, mainly driven by a 40% increase in the grain port throughput attributed to higher Uruguayan exports of soybeans and higher tariffs at the iron ore port terminal. In the barge segment, Q2 2022 EBITDA increased 36% to $5.3 million mainly due to higher liquid cargo and higher other income from foreign exchange differences.
In the cabotage business, Q2 2022 EBITDA increased by $2.7 million to $2.2 million due to more operating days of the fleet as the market environment in Argentina has improved compared to last year. For Q2 2022, profit was $6.4 million compared to $0.8 million loss in the same period last year, mainly due to improved performance of the company.
Turning to the financial results for the six months period ending June 30, 2022, revenue increased 16% to $127.8 million. EBITDA increased 24% to $56.2 million, and profit increased by $4.3 million to $6 million compared to the same period last year.
Please turn to Slide 10, Navios Logistics has no significant debt maturities until 2025. Cash and cash equivalents at the end of the second quarter of 2022 were $37.6 million. This concludes my presentation.
I would now like to turn the call over to Angeliki for her final comments. Angeliki?
Angeliki Frangou
Thank you, Ioannis. This concludes our formal presentation, and we open the call to questions.
Question-and-Answer Session
Operator
Thank you [Operator Instructions]. I am showing no questions at this time. I would now like to turn the call back over to Angeliki for closing remarks.
Angeliki Frangou
Thank you. This is an important quarter. We completed the sale of our dry bulk fleet for over $830 million, and we used the profit to deleverage [indiscernible] about $780 million. In the backdrop of the food security and energy consideration around the world, we think that concentrating in Navios South American Logistics, where we control critical infrastructure is going to be very important and favorable. We have the only dedicated iron ore port and the largest independent freight terminal in Hidrovia in an area that is rich in commodities and grains.
Also, we see our port is in the mouth of the river, where we have — we are unaffected from the drought and any impact on results. Also, we see that the increased activity in iron ore with new players coming in the mine, J&F, Vetria for the mines, we see all these new players bringing iron ore down the river and also coming to our port. So we see favorable growth in the area.
Thank you. This completes the quarterly results.
Operator
Thank you. Ladies and gentlemen, this concludes today’s event. You may now disconnect.
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