Q3 2011 Navios Maritime Holdings Inc Earnings Conference Call

Nov 17, 2011 AM EST
Thomson Reuters StreetEvents Event Transcript
E D I T E D   V E R S I O N

NM - Navios Maritime Holdings Inc
Q3 2011 Navios Maritime Holdings Inc Earnings Conference Call
Nov 17, 2011 / 01:30PM GMT 

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Corporate Participants
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   *  Laura Kowalcyk
      Navios Maritime Holdings Inc. - VP, Corporate Communications
   *  Angeliki Frangou
      Navios Maritime Holdings Inc. - Chairman & CEO
   *  Ted Petrone
      Navios Maritime Holdings Inc. - President, Navios Corporation
   *  Ioannis Karyotis
      Navios Maritime Holdings Inc. - SVP, Strategic Planning & CFO, NSAL
   *  George Achniotis
      Navios Maritime Holdings Inc. - CFO

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Conference Call Participants
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   *  Natasha Boyden
      Cantor Fitzgerald - Analyst
   *  Seth Lowry
      Citigroup - Analyst

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Presentation
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 Laura Kowalcyk,  Navios Maritime Holdings Inc. - VP, Corporate Communications   [1]
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 Thank you for joining us for this morning's Navios Maritime Holdings third-quarter and nine months 2011 earnings conference call. With us today from the Company are Chairman and CEO, Ms. Angeliki Frangou; President, Mr. Ted Petrone; SVP of Strategic Planning, Mr. Ioannis Karyotis; and Chief Financial Officer, Mr. George Achniotis. As a reminder, this conference call is also being webcast. To access the webcast, please go to the Investors section of Navios Holdings website, www.navios.com.

 Before I review the structure of this morning's call, I would like to read the Safe Harbor statement. This conference call could contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Navios. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are based upon the current beliefs and expectations of Navios Holdings management and are subject to risks and uncertainties which could cause actual results to differ from forward-looking statements. Such risks are more fully discussed in Navios Holdings' filings with the Securities and Exchange Commission. The information set forth in this conference call should be understood in light of such risks. Navios Holdings does not assume any obligation to update the information contained in the call.

 Thank you.

 The agenda for today's call is as follows. First, Ms. Frangou will offer opening remarks. Next, Mr. Petrone will provide an operational update and an industry overview. Following Mr. Petrone's remarks, Mr. Karyotis will go through an overview including recent financials for Navios South American Logistics. Then Mr. Achniotis will review Navios Holdings' financial results. Lastly, we will open the call to take your questions.

 I would now like to turn the call over to Navios Holdings' Chairman and CEO, Ms. Angeliki Frangou. Angeliki?

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 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman & CEO   [2]
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 Thank you and good morning to all of you joining us on today's call. We are pleased to report our results for the third quarter of 2011. We had a solid quarter. Revenue and EBITDA went up 7% and 6% respectively. This was not an easy task given the difficult market we have been experiencing in the past couple of years, and it reflects the hard work of the Navios team in managing our relationships with counterparties and physical fleet during a very turbulent period. We have once again declared a $0.06 dividend for the quarter, representing a [hit] of about 6%.

 Slide two shows our current structure. The value of Navios Holdings primarily derives from four areas -- the drybulk fleet within Navios Holdings and three principal operating subsidiaries. The whole continues to be valued at less than the [sum of its] parts. As you can see from the quick math, the value of Navios Holdings in the two publicly listed subsidiaries is $2.99 per share. The market does think that the other two businesses are only worth $0.72. Navios Holdings core fleet, drybulk fleet consists of 43 vessels in the water. This fleet has long-term charters with creditworthy counterparties that are always worth their AA-plus European government entity. Our insurance coverage is unique. This insurance should provide comfort to all our stakeholders that we can continue to manage during this current period.

 The value of Navios Logistics is also growing. We have a superb management team, which is addressing the market opportunity, and together we have transformed Navios Logistics into a key provider of [our share business] in the Hidrovia region of South America. Ioannis Karyotis will address Navios Logistics' results in further detail later.

 Slide three shows our competitive positioning. It reflects our strategy and the hard work we have dedicated to maintain costs in a very difficult market. Looking forward we have already covered almost 70% of our fleet for 2012. We are also working on our book for 2013. We have covered almost 42% of our fleet base for this period. This forward visibility provides us with a margin of safety.

 I wanted to share with you our assessment of our positioning. 2011 is virtually over. All of our days are contracted, and you can see that revenues will exceed expenses.

 We also feel very good for 2012. As we stand at this moment, we have 4778 open vessel days. But let's focus on the revenue based on the number of vessels contracted at this moment. As you can see from the chart, our contracted revenue is about $13 million less than our all-in costs. Now if you divide this $13 million deficit by the 4778 open vessel days, you can see that we only need $2740 per day per vessel for a breakeven. We think this is insignificant.

 Just to provide a little bit of context for our below breakeven rate, we have provided the 2011 year-to-date BDI time charter averages for all type of vessels. This rate in a difficult year ranged from $13,800 per day to $14,500 per day for the different types, well above our breakeven rate. Further comfort is gained from reviewing the list of vessels that we have opened. We have only one Capesize vessel open, two Panamaxes, and the balance are Handymax vessels. Handymax have proved to be particularly resilient in the current environment. They actually had the best yearly average for 2011, even though it is a smaller -- smallest vessel class.

 Finally, we know that the vessels are coming open proportionally throughout the year, so we think that we will do significantly better.

 As you know, we have been reasonably conservative. As a result, our CapEx program only requires equity payments totaling $8 million for 2011 and 2012 and none beyond that. These payments result from the recent [date we need] to acquire Kamsarmax from a South Korean shipyard for delivery in the first quarter of next year. We have already chartered out this vessel for two years, and we expect annual EBITDA of $3 million and total EBITDA of $6 million.

 Our focus today is on balancing a solid balance sheet and rewarding shareholders with a return of capital. We continue to make dividends and, as mentioned earlier, declare a dividend for the third quarter of 2011.

 We have also recommenced purchasing shares on the open market as we view the recent weakness in the market as an opportunity for our shareholders. We may from time to time make further purchases.

 Let's now turn to slide four, which shows our liquidity of $264 million, of which $212.5 million is cash, and net debt to book capitalization is relatively modest up to 49.6%, and we have no significant capital repayment or CapEx until 2017.

 I also wanted to remind you about the structure of our balance sheet. Our debt is long-term and stable. Bonds represent more than 60% of our debt outstanding with an amortization until maturity. These bonds have favorable covenants allowing us operating and financial flexibility in this kind of a market. In a market featuring declining asset values, perhaps the most important is the absence of any loan-to-value maintenance obligation, and we have continued access to the debt market as the commercial lending market tightens.

 Slide five sets for Navios substantially fixed revenue and low breakeven costs. As you can see, almost 100% of the Navios revenue is fixed for 2011 at about $25,000 per day. In addition, approximately 70% is fixed for 2012 for $25,586 per day per vessel. We have already discussed our low breakeven rate for 2012.

 One thing that I would like to emphasize is that costs include all operating, financing and financing expressed, include maintenance CapEx, dry docking, chartering expenses for all our chartering fleet, G&A including credit default insurance, as well as interest cost and capital repayments.

 With that, I would like to turn the call over to Mr. Ted Petrone, Navios President, who will take you through Navios operation and our invested perspective. Ted?

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 Ted Petrone,  Navios Maritime Holdings Inc. - President, Navios Corporation   [3]
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 Thank you, Angeliki, and good morning, all. Please turn to slide six. Our long-term core fleet consists of 56 vessels, totaling 5.8 million deadweight. We have 43 vessels on the water with an average age of five years. This is considerably younger than the industry average of less than 13 years.

 Please turn to slide seven. Average charter-out rate for its core fleet is $25,050 a day for 2011, which increases through 2013. 99.7% of Navios' fleet is chartered out for 2011; 68.4% for 2012, which is a 12% increase from Q2, while we also fixed out 41.5% for 2013. In total, we have contracted revenue of about $735 million through the end of 2013 and have ensured this contracted revenue through an EU-backed AA-plus entity.

 Please turn to slide eight. We enjoy vessel operating expenses significantly below the industry average in all asset classes. Navios' current daily OpEx is $4351, 31% below the industry average. This $1976 daily savings per vessel amounts to a $20 million annual savings for the current owned fleet in the water, which goes directly to our bottom line. We expect to continue to leverage our economies of scale advantage.

 Please turn to slide nine. 2011 trade estimates were revised down due to lower than anticipated shipments in the first half of 2011 as shipments were negatively affected by natural disasters. Steady recovery on the raw material production side since the middle of the year increased vessel demand, and by mid-October the BDI reached its highest point for the year at $2073, driven by rapidly increasing cargo volume and port congestion.

 The biggest increases have been from iron ore and coal exports from Australia and Brazil raising total Q3 exports of these commodities to 462 million metric tons. This represented a 16% increase above the restricted Q1 levels.

 In spite of recent fluctuations, iron ore and coal prices remain at historically high levels, suggesting continued solid demand, and increased trade as cargo availability continues to rise. While demand for drybulk commodities remains strong, the European sovereign debt crisis is proving more severe than originally feared. This raises concerns regarding global economic growth, which, in turn, could threaten demand for raw materials.

 Please turn to slide 10. The drivers for world GDP growth continue to evolve as developing economies contribute a higher percentage to total world growth than the developed economies, and the IMF expects that trend to continue for the foreseeable future. The IMF September forecast shows that emerging economies will continue to grow at 6.4% in 2011 and 6.1% in 2012. The primary engines of trade growth continue to be China, India and Brazil with other emerging countries adding strong growth. China's economy grew at 9.1% in Q3. In 2012 the IMF expects the Chinese economy to grow at 9%. India's economic growth is expected to reach 7.5% in 2012. More importantly, world global growth is expected to reach 4% this year and 4% next year.

 Turning to slide 11, in order to continue their urbanization and industrialization, China and India continue to invest heavily in infrastructure throughout Latin America, Africa and the Middle East. Both countries are securing supply lines of natural resources with these infrastructure investments to ensure continued growth. As a larger portion of world trade is occurring between emerging and developing economies, trade patterns are shifting eastward and southward.

 Moving to slide 12, in 2010 seaborne iron ore trade set a new record as imports increased for the ninth consecutive year. This increase has been the result of high demand from most steelmaking countries. Going forward the growth in worldwide iron ore imports will be constrained until new iron ore mines and expansion projects become operational.

 Over the medium to long term, miners are investing heavily in additional production. The chart on the upper right depicts potential new iron ore mining capacities of about 600 million tons per annum on a cumulative basis through 2014. These expansions will increase to tons carried and to ton miles. Development and urbanization of the Western and Central parts of China will continue to contribute significantly to steel consumption in 2011 and onwards.

 Crude steel production for China for the first 10 months of 2011 was 582 million tons, up 11% year on year. China imported 49.9 million metric tons of iron ore in October. Iron ore imports have increased by 11% year on year to 559 million tons for the first 10 months, and domestic iron ore production was estimated to be up 23% to about 1.7 billion tons. In addition to iron ore imports, China continues its imports of coal for use in steelmaking and for power generation.

 Turning to slide 13, India has taken initial steps to industrialize and urbanize. As you can see in the lower right-hand chart, India is expected to increase its urban population to 590 million people by 2030. That means India will have to build about 1.5 New York Cities per year during that time. To meet this demand, India has become the world's fourth largest steel producer and has plans to expand production further. To keep pace with expanding steel and electricity production, India coal imports shown on the left-hand chart have increased dramatically at a 25% compound annual growth rate since 2006. According to the Central Electricity Authority of India, substantial demand will continue as most planned power generators will be coal-fired. India now imports more coal per annum than the UK, Italy, France and Germany combined. Indian companies are buying coal assets globally to assure future supplies meet projected growth.

 Please turn to slide 14. The confluence of low freight rates, expensive fuel and high scrap prices have led to a surge in scrapping of vessels. In the first half of 2011, more Capesize vessels were scrapped than in the five-year period of 2006 to 2010. The high steel prices indicate that a Capesize owner can earn approximately $12 million on scrapping the vessel or approximately 30% of the value of a five-year-old vessel.

 Through November 11, 324 vessels, including 66 Capes totaling 20.7 million deadweight tons, have been sold for demolition. This deadweight total already surpasses the record 12.3 million deadweight scrapped in all of 1986 and represents an annualized scrapping rate of about 24 million deadweight tons or about 4.5% of the fleet. The current environment should lead to high scrapping levels as about 11% of the fleet is older than 25 years of age and 17.4% of the fleet is over 20 years providing about 104 million deadweight of scrapping potential. This is potential to get higher demolition in 2012 as scrap prices remain high and the major new Chinese recycling facility in Dalian is due to enter service.

 Moving to slide 15, 2010 new building deliveries were 77.9 million deadweight against an expected 125.6 million deadweight, a slippage of approximately 40%. The order book for 2011 ballooned from 120 million deadweight to 137 million deadweight as statisticians reclassified many ships that were not delivered in 2010 to 2011 deliveries.

 Through October, non-deliveries continued at about 31% as new building deliveries were 78.2 million deadweight against an expected 113.1 million deadweight. This demonstrates that non-deliveries continue to be a substantial part of the drybulk order book. Additions to the fleet this year are on pace to be somewhat higher than 2010, but net growth in deadweight should be lower after expected scrapping is taken into account. The order book declines in 2012 and again in 2013.

 Please turn to slide 16. We currently own 27.1% of Navios Partners, including a 2% GP interest. Navios Partners operates a fleet of 18 vessels, equaling 1.9 million deadweight with an average age of [5.0] years.

 Turning to slide 17, Navios Partners provides a significant cash flow to Navios Holdings. Through Q3 2011, we received more than $70 million in total distributions from partners. This year we received $25.6 million in distributions. This is more than 100% of Navios Holdings' expected annual dividend. Including Navios Acquisition's dividend, Navios Holdings receives 130% of its expected annual dividend from its ownership in these two companies.

 Please turn to slide 18. We have an approximate 54% economic interest in Navios Maritime Acquisition. Navios Acquisition's current fleet consists of 26 tanker vessels totaling 3.2 million deadweight. Navios Acquisition currently has 14 vessels in the water with an average age of six years. We anticipate that our new building program for product tankers positions us to take advantage of favorable long-term industry dynamics.

 Please turn to slide 19. The Company summarized on slide 19 Navios Acquisition has a large, modern and diverse tanker fleet worth more than $1.2 billion. We have long-term contracted revenue that is well above our Company's low operating breakeven, and we have profit-sharing arrangements in many contracts. These agreements limit our downside risk to the base rate and allows Navios Acquisition to enjoy the upside volatility. The related cash flow also sustains us for long periods in distressed market conditions.

 That concludes my presentation. I would now like to turn the call over to Ioannis Karyotis, Senior VP of Strategic Planning.

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 Ioannis Karyotis,  Navios Maritime Holdings Inc. - SVP, Strategic Planning & CFO, NSAL   [4]
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 Thanks, Ted. Please turn to slide 20. Navios South American Logistics has three segments, each of which enjoys significant growth prospects. In port terminals, we expect the construction of the new 100,000 tons capacity silo in Uruguay to be completed in March 2012.

 In barge business, we took delivery of three convoys consisting of three pushboats and 66 barges. These convoys serve a new long-term agreement for iron ore transportation. In Q3, however, only one of these three new convoys was in service for about one month. We anticipate that all three convoys will be operational for the entire period in the first quarter of 2012.

 In cabotage, we bought out our previous minority partner for $8.5 million cash and now have 100% ownership of four product barges and two self-propelled barges.

 Please turn to slide 21. Navios South American Logistics seeks long-term revenue from a diverse portfolio of high-quality clients. Our strategic relationships, investments and the overall favorable export market fundamentals position us well.

 Please turn to slide 22. For Q3 2011 revenues increased 24% to $68.8 million compared to the same period last year. All three segments saw the increased revenues over the comparable quarter in the prior year. EBITDA for the same period was $8.9 million, 6% higher compared to the third quarter of 2010. All terminals achieved 35% increase in revenues while EBITDA declined 21% to $4.2 million, mainly due to a temporary decline in the activity in our liquid port this quarter.

 Barge business achieved 8% increase in revenues, driven by higher iron ore volumes transported. EBITDA declined by $0.5 million to $0.6 million due to some unexpected pushboat repairs and increased port and voyage expenses. Cabotage business achieved [24%] increase in revenues, while EBITDA grew 112% compared to the same period in 2010 to $4.1 million, mainly because we had two additional vessels operating for the period.

 Interest expenses net in the third quarter increased to $5.1 million from $1.1 million for the same period in 2010 due to the interest expense associated with the senior notes issued in the second quarter of 2011. This resulted in a decline in the third quarter net income.

 Turning to the nine-month period ended September 30, 2011, which better reflects this year's operations improvement, revenues increased by 17% compared to the nine months of 2010, $167.9 million. EBITDA grew 27% to $29 million. Net income affected by higher interest expenses was $1 million for the nine-month period.

 Please turn to slide 23. Slide 23 provides selected balance sheet data as of September 30, 2011. Navios Logistics had a strong balance sheet. In the third quarter, cash and cash equivalents amounted to $57.8 million as compared to $39.2 million on December 31, 2010.

 As we have already announced, during the third quarter, we acquired minority interest in five vessel-owned subsidiaries, and we paid their debt with part of the proceeds from the senior notes.

 We also concluded the acquisition and transportation in South America of three pushboats, 66 barges and a floating dry dock for a total cost of approximately $56 million. Net debt to book capitalization at the end of the third quarter was a conservative 27.3%.

 Now I would like to turn the call over to George Achniotis, Navios Holdings' Chief Financial Officer, who will take you through third-quarter and nine months 2011 financial results. George?

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 George Achniotis,  Navios Maritime Holdings Inc. - CFO   [5]
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 Thank you and good morning, all. Please turn to slide 24 for a review of the third-quarter financial highlights. I would like to draw your attention to the fact that for comparability purposes we are presenting the consolidated results on a pro forma basis, excluding the effects of Navios Acquisition.

 Despite a material reduction in the time-charter equivalent rate, EBITDA for the quarter increased by 6% compared to the same period last year from $63.3 million to $67.3 million. The increase is mainly attributable to the delivery of new building vessels to our own fleet and the increase in the available days of the owned fleet from 2118 in the third quarter of 2010 to 2489 days in the same period of 2011. During the same period, the available days attributed to the chartered-in fleet decreased by 307 days. As you know, there is a higher operating profit margin on the owned vessels versus the chartered-in ones because owned vessels' operating expenses are less than the chartered-in costs for chartered-in vessels.

 Another factor that contributed to the increase in EBITDA was a slightly high contribution from Navios South American Logistics in the quarter. Despite the increase in EBITDA, net income for the period reduced from $18.7 million in 2010 to $16.3 million in 2011. The reduction is mainly attributable to the higher interest expense following the issuance of the $200 million bond at Navios Logistics in the second quarter of 2011. Net interest expense in the third quarter of 2011 increased by $3 million compared to the same period of 2010.

 Depreciation and amortization also increased between the two periods by $3 million, reflecting the increase in the owned fleet.

 Turning to the highlights of the results for the nine-month periods ending on September 30, EBITDA in both years was affected by certain one-off items. In 2011 EBITDA was affected by a $38.8 million gain from the sale of Navios Luz and Navios Orbiter to Navios Partners, $21.2 million of expense relating to the bond extinguishment in January of 2011, and a $35.3 million non-cash accounting loss on the deconsolidation of Navios Acquisition.

 In 2010 EBITDA included a gain of $26.1 million from the sale of Navios Aurora II, Navios Hyperion, and Navios Pollux to Navios Partners; a $17.7 million gain from the initial consolidation of Navios Acquisition, and a $4 million write-off of an unfavorable short-term charter. Excluding these adjustments for the nine-month period ending September 30, 2011, adjusted EBITDA increased by 4% to $200 million from $193 million in 2010. The main reason for the increase was a contribution of Navios Logistics whose EBITDA increased from $23 million in 2010 to $29 million in 2011.

 Another reason for the increase was the delivery of the new building vessels to the owned fleet. The available days of the owned fleet increased from 6330 in the nine months of 2010 to 7649 days in the same period in 2011. The increase was mitigated by a reduction in the available days of the chartered-in fleet, which decreased by 1252 days, and a reduction in the TCE rate achieved in 2011 compared to 2010, which reduced from $25,298 per day to $23,727 per day.

 Net income for the nine months of 2011 and 2010 was also affected by the one-off items discussed earlier. Excluding the effect of these items, adjusted net income for the nine months through September 2011 decreased to $48 million compared to $57 million in 2010. The decrease is mainly attributable to the increase in interest expense due to the new bonds issued by Navios Logistics and the higher depreciation due to the increase in the number of owned vessels.

 Net interest expense increased from $63.6 million in the first nine months of 2010 to $70.5 million in 2011, and depreciation and amortization was up from $68.8 million to $74.3 million in the same period.

 Please turn now to slide 25 where the balance sheet highlights are presented. The cash balance as of September 30, 2011, increased by $46.7 million to $212.5 million compared to $165.8 million at the end of December 2010. The 28% increase reflects our intention to maintain a strong cash position in order to be able to take advantage of distressed transactions that may become available in 2012.

 Other current assets increased temporarily at the end of the quarter. Subsequent to the quarter-end, a significant amount was settled and the balance reduced. Other current liabilities also increased at the end of September 2011 compared to the end of December 2010. The main movement came from Navios Logistics from the capital lease of two of its vessels and accrued interest from the bond issued in Q2. Despite the prolonged period of depressed rates and vessel values in the dry bulk market, our net debt to book capitalization ratio remained below 50%, and our debt covenants were met at the end of the quarter.

 Turning to slide 26, a dividend for the third quarter of 2011 of $0.06 per share was declared to common shareholders as of December 19 to be paid on January 4. The total annualized cash dividend inflows from our ownership in Navios Partners and Navios Acquisition is approximately $32 million. This exceeds the annual dividend paid out by Navios Holdings by $8 million.

 As Angeliki mentioned earlier, we recently used the share buyback scheme we have in place to repurchase approximately 74,000 shares. The Board had previously approved a repurchase program of up to $25 million.

 This concludes my review of the financials. At this point I will turn the call back over to Angeliki for her closing remarks. Angeliki?

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 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman & CEO   [6]
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 Thank you and this concludes our formal presentation. We open the call to questions.



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Questions and Answers
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Operator   [1]
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 (Operator Instructions). Natasha Boyden, Cantor Fitzgerald.

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 Natasha Boyden,  Cantor Fitzgerald - Analyst   [2]
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 The Capesize market has performed very well over the past couple of months. I'm just really wondering what you see as the main drivers of that phenomenon and how permanent do you believe that uptick is?

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 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman & CEO   [3]
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 I think the main thing is coal and iron ore. I mean we have seen that the fluctuation in the iron ore price gave the possibility of additional trade. We have seen the recent days [there has been another] push up in rates, and this is good for the market.

 Actually we can say that from the last quarter, for the last four months, we have seen that the shipping market, the drybulk shipping market, the demand is very good.

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 Natasha Boyden,  Cantor Fitzgerald - Analyst   [4]
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 Okay. Great. Just moving over to the S&P market, what are you seeing in terms of liquidity there? I mean are you seeing more vessels moving at these lower prices, or are sellers still hesitant to sell believing that there might be an upturn around the corner? And what do you believe asset values could do at this point? Do you think they could come down further?

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 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman & CEO   [5]
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 I think the issue today isn't all demand, which, as I said a moment earlier, is good. I mean better than people had expected in the beginning of 2011. There is no optimism in the market. So you can see that the sales drive is really affected by the optimism, and we can see that prices are low. I don't see -- there is no further pushing down. We have not seen any deterioration right now, but don't forget that if you compare it to the first half of 2011, we have moved about 15% down.

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 Natasha Boyden,  Cantor Fitzgerald - Analyst   [6]
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 Okay. And then lastly, before I turn it over, given today's events with one of your competitors, I'm just wondering how you see the banks acting given that they are healthier than a few years ago and a lot of companies are in violation of their covenants? Do you think the banks are going to be more aggressive in terms of foreclosing?

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 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman & CEO   [7]
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 I think there's three reasons where you can see that the banks will be further acting in 2012. Remember, the majority of the banks are European. Dollar funding in European banks is very difficult today because the US does not provide the funding to the European banks.

 Second, under Basel III you need 9% Tier 1 capital from 2012, which means that the banks will have to either raise equity in today's market or shrink their balance sheet.

 What is happening is they are shrinking their balance sheets in Europe, and the third item is that you have covenant relief in 2008. Under the rules, they have three years if the [companies ask for] relief again, this will be considered, and they will have to be categorized in a different way.

 So, because of these three reasons, I think 2012 will provide opportunities, and banks will have to move to different directions. And we have seen in the second half of 2011, we have seen in the capital markets at least two bankruptcies. This will be further accelerated in 2012. This is one of the things in the analysis we internally look at Navios is not only how strong a balance it is, but is also the burnout rate and the cash flow generation. The majority of the shipping companies have burnout rates. They had a burnout rate. In the Navios case, we have cash flow generation because of our very low breakeven.

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Operator   [8]
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 Christian Wetherbee, Citi.

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 Seth Lowry,  Citigroup - Analyst   [9]
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 This is actually Seth Lowry who is in for Chris today. If I could just touch on your previous two acquisitions at the South Korean shipyards, is that from the same yard? Are there potential future acquisitions at the same yard that you might view as attractive? Could you just give us some more color on that point?

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 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman & CEO   [10]
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 These are from the same shipyard. I mean if we have an opportunity, this was really a new building vessel that we got it only one quarter away from the delivery. The vessel is delivering in March. We could very quickly fix the vessel for two years. So the generation is $6 million EBITDA. So, to us, it was a very small transaction that made sense with a zero risk really on our balance sheet, and that is why we moved quickly.

 The reality is that Navios is using the larger deals, but this is a deal that made sense, and we quickly moved because of the quality of the vessel, which we already know very well.

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 Seth Lowry,  Citigroup - Analyst   [11]
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 Okay. And it looked like only a small portion of the acquisition costs was paid for by cash. And sort of piggybacking on the previous question, was there -- was the financing with your existing lenders, was there any pushback for financing vessel for acquisition given the current market? I guess my real question is, is acquisition financing still available to you?

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 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman & CEO   [12]
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 I guess. I mean it is obvious. I mean we did one previously, and we have now this one on similar terms. So yes, financing is here for us. It is not available for everyone.

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 Seth Lowry,  Citigroup - Analyst   [13]
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 Okay. And then just lastly, if I could just switch gears to logistics, I know you cited some temporary factors in your port and barging business. Is it reasonable to assume that the pushboat repairs and some of the other temporary factors subside as we move into the fourth quarter, or could you just give us a sense of timing on when some of those issues may resolve themselves?

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 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman & CEO   [14]
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 Yes. Moving into the Q4, this is subsiding. The one issue you have to also remember is that there is a seasonal on the board. Meaning Q1 and Q4 is a low season for the grain business. So this is one of the factors we should remember in Q4. Also, one other issue is that the new convoy that came from Vale will have the full year -- full quarter from Q1 2012.

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Operator   [15]
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 At this time we have no further questions. I would now like to turn the floor back over to Ms. Frangou for any closing remarks.

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 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman & CEO   [16]
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 Thank you. This concludes our Q3 results.

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Operator   [17]
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 Thank you. This concludes today's conference call. You may now disconnect.






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