Q3 2013 Navios Maritime Holdings Earnings Conference Call

Nov 25, 2013 AM EST
NM - Navios Maritime Holdings Inc
Q3 2013 Navios Maritime Holdings Earnings Conference Call
Nov 25, 2013 / 01:30PM GMT 

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Corporate Participants
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   *  Angeliki Frangou
      Navios Maritime Holdings Inc. - Chairman, CEO
   *  Ted Petrone
      Navios Corporation - President
   *  George Achniotis
      Navios Maritime Holdings Inc. - CFO
   *  Ioannis Karyotis
      Navios South American Logistics Inc. - CFO

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Conference Call Participants
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   *  Seth Lowry
      Citigroup - Analyst
   *  Omar Nokta
      Global Hunter Securities - Analyst
   *  Ben Nolan
      Stifel Nicolaus - Analyst

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Presentation
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Operator   [1]
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 Thank you for joining us this morning for Navios Maritime Holdings' third-quarter 2013 earnings conference call. With us today from the Company are Chairman and CEO, Angeliki Frangou; President Mr. Ted Petrone; Chief Financial Officer, Mr. George Achniotis; SVP of Strategic Planning, Mr. Ioannis Karyotis.

 As a reminder this conference call is also being webcast. To access the webcast please go to the Investors section of Navios Holdings' website at 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 Holdings. Forward-looking statements are statements that are not historical fact. 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 the 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 this call. Thank you.

 We will begin with formal remarks from the team and then after we will open the call to take your questions. Now I would 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, Laura. Good morning to all of you joining us on today's call. We are pleased to report our results for the third quarter of 2013.

 We had a solid quarter and reported $40.57 million of EBITDA. We continued our operating discipline. Through a number of initiatives, we materially reduced our daily operating expenses to $3,631 and daily cash breakeven to $8,590 per day per vessel for 2014. As we focus on execution, we have returned capital to our shareholders through dividend payments and declared a $0.06 dividend for the third quarter of 2013, representing a yield of 3.1%.

 Slide 2 shows our current corporate [snapshot], the value of Navios Holdings, primarily derived from four areas: the drybulk fleet within Navios Holdings, and three (inaudible) in (inaudible) [hull] is (inaudible) from the time of the (inaudible).

 As of the close of business this past Friday, Navios Holdings common shares [stated] at $7.67 per share. In contrast, Navios Holdings' ownership stake in the two publicly listed subsidiaries were valued at $5.12 per share.

 This implies a implies a value of less than $265 million for the [managed] core business of 58 vessels plus our controlling interest in Navios Logistics. We believe the value of Navios Holdings in (inaudible) Navios Logistics (inaudible) is (inaudible).

 As we will discuss shortly, among other things Navios Logistics recently signed a [Greek] 20-year contract for providing [staff] and (inaudible) services to Vale. We expect this contract to generate no less than $35 million of annual EBITDA.

 Slide 3 shows our Navios Group access to the capital markets. This access has fuelled our ability to take (inaudible) on depressed asset values. So far in 2013, we raised over $2.3 billion and acquired 44 vessels. [Overall], we increased our Group fleet by 45%.

 This access to capital did not develop overnight. Rather this access is a testament to a lot of hard work during this (inaudible) year.

 When the [capital] (inaudible) we'll focus on improving operations and bringing down costs. We are acting to safeguard our stakeholders regardless of how difficult (inaudible) [market] and investment capital (inaudible) that were good stewards of their capital.

 We have also worked to develop access into various markets. We've [absolutely] reduced our cost of capital, in addition to a long-time access to the US bond market in [June] Navios (inaudible) the Term Loan B margin. To our knowledge this was the first time that an international shipping company accessed this market.

 [Henceforth], as [long] as the Company's disciplined business model and its ability to provide our industry (inaudible). It is not a matter of if but a matter of when (inaudible). We monitor these things on a daily basis and (inaudible) for the [next supply].

 As we navigate we try to position the Company and the Group so that we have not simply the access (inaudible). We want to be able to take advantage of the exchanges. To do so, we need to be positioned properly.

 In the past when the [rate] and (inaudible) market were robust, (inaudible) to long-term capital (inaudible). This generated stable cash flow and allowed us the [logistics] to plan and position the Company for the medium to long term.

 It also allowed us to develop an access to the debt capital markets which became particularly important in the past few years when the European banks and the government lenders of the shipping sector began [divesting] their balance sheet and withdrawing from the sector. More recently, this ability allowed us to take advantage over many of our peers who were being distracted by efforts at shoring up their balance sheets and in [joining] markets with (inaudible). Consequently, it was generally unable to take advantage of opportunities that were [bringing] the fleet in [existing pattern].

 In that respect, once a fleet (inaudible) we have expanded our Group fleet by almost 100 vessels since 2008. As we all remember all too well, this is the time that includes the US financial crisis and the eurozone finance (inaudible).

 The table also provides details for the growth of each company. With recovery on the horizon, we have greatly increased our (inaudible) growth opportunity.

 Navios Holdings expanded its fleet. Navios Partners grew its fleet by more than 200%. Navios Acquisition (inaudible) acquired 44 vessels. Finally, Navios Logistics has grown the operating capacity substantially. All of these subsidiaries have [exploited] the same operating discipline and growth economic strategy, and it has formed an increasingly larger portion of the value of Navios Holdings.

 Slide 5 I think (inaudible) the Navios Group activities and the competitive position that [grow] within our subsidiaries (inaudible). Navios Holdings refinanced our existing secured note with a newly [offered] $650 million of 7.375% senior secured notes. We lowered our coupon by 150 basis points and extended the bond maturity by more than 4 years, until 2022.

 Navios Holdings also acquired 20 vessels while maintaining a low cash breakeven of $8,590 for 2014. These bonds help us materially reduce our cash breakeven cost.

 We have 12,000 open days in 2014. But the charter rate market is improving. The time charter equivalent (inaudible) achieved in the third quarter was about 15% higher than the one achieved in the second quarter of 2013. Consequently, we are positioned to generate significant additional cash flow as the market further improves.

 Navios South American Logistics recently entered into two transformational deals. In the most recent one, Navios Logistics entered into a 20-year contract with Vale for the storage and transshipment of minimal commodities. This will generate a minimum of $35 million annual EBITDA and an estimated $1 billion of EBITDA over the life of the contract. Vale may contractually increase its minimum guaranteed volumes by 50%, which would increase annual EBITDA to $50 million.

 We also entered into a chartered-out contract for six years at $14,500 per day for four jumbo barge convoys. (inaudible) approximately 50% more capacity, [including] as a [point] on these barge conveys can be transported with the same [OpEx] as would be created with convoys composed of smaller barges generally used (inaudible).

 We anticipate that the chartered convoys will bring us an estimated $3.2 million annual EBITDA. We will use the proceeds of the $90 million add-on of the senior unsecured notes to fund this CapEx for the new [partner].

 Turning to slide 6, Navios Partners acquired five container vessels with 10-year charter-out contracts (inaudible) for $275 million. They acquired an additional four drybulk vessels for $108 million.

 This action solidifies Navios Partners (inaudible) in opening the business up to the container market. Navios Partners raised $593 million in the public markets year to date.

 Navios Acquisition acquired 11 product tankers this year for $307 million, and also four VLCCs for $198 million as [entry] (inaudible) as [low] as the low of the double-hull tankers, giving the company additional (inaudible) exposure to the free cash flow from the existing VLCCs. The company has raised $930 million in the public markets year to date.

 Slide 7 highlights our liquidity position. We have a conservative balance sheet with a net debt-to-capitalization of approximately 48% and liquidity of $220 million.

 Our liquidity should be viewed in the context of our debt requirements. The Company has no material CapEx or debt maturities for the next six year. As a result our liquidity will be dedicated to expansion opportunities and operating needs of the Company.

 Slide 8 sets forth the Navios low cost structure. For 2014 we have fixed 29.2% of our vessels at an average contracted day charter-out rate of $15,376. This is well above our fully loaded cost of $13,155 per day per vessel.

 Our cost [competitive fleet] as we have [hastened] to expand our fleet (inaudible) acquisition at historically low valuations. I will remind you, as I do every quarter, that our breakeven analysis includes all operating expenses, drydocking expenses, charter-in expenses for our charter-in fleet, G&A expenses including credit default insurance expenses, as well as interest expenses and capital repayments.

 Slide 9 outlines the Company's chartering strategy. Our estimated 2014 breakeven cost for these vessels, including all costs, is $8,590 per day per vessel. Based on the open days of our fleet mix, our current market rate is $14,439.

 With market recovery [owing] to the (inaudible) [back] to historical average, we [guide] approximately $20,000 a day for the 20-year average rate and $30,000 per day for the 10-year average rate. Consequently, given our $8,590 day charter [equivalent rate], this Company will enjoy significant cash flow should the market return to historical norms.

 I also want to make the point that as our subsidiaries mature and the [cycle] allows it, we anticipate that we are going to receive increased dividend distributions from them. We note this; but as [last] mentioned the [can] distribution leverage on the table.

 I would like now to turn the call over to Mr. Ted Petrone, Navios' President, who will take you through Navios [aspirations] and (inaudible). Ted?

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 Ted Petrone,  Navios Corporation - President   [3]
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 Thank you, Angeliki. Please turn to slide 10. We are one of the largest drybulk operators in the world. Our long-term core fleet consists of 58 vessels totaling 5.8 million deadweight.

 We have 51 vessels in the water with an average age of 6.6 years. This is younger than the industry average of 9.4 years.

 Please turn to slide 11. Slide 11 offers an update of our strategic relationships with HSH Nordbank. We, along with our affiliates, formed Navios Europe to hold 10 vessels. Navios Holdings will own 47.5% of Navios Europe.

 Navios Europe recently arranged for the technical and commercial management of 7 out of the 10 vessels in the transaction. Navios Europe is expected to take ownership of all 10 vessels within November, at which point the management of the remaining vessels will also be transferred. The deal is an example of the excellent working relationship that HSH and Navios have developed, and our mutual goal is to complete this deal and work together toward similar transactions.

 Navios Asia, our joint venture with the private Japanese owner, took delivery of the first of six vessels in October. The second vessel will deliver by January next year. Navios Asia intends to partially finance the six vessels with about 55% bank debt, with terms that are consistent with their existing credit facility.

 As noted at the bottom of the slide, we have acquired four charter-free Panamaxes outright at cyclical lows.

 Please turn to slide 12. Core vessels' operating expenses cost 35% below the industry average in all asset classes. Their $1,990 daily savings per vessel as compared to the industry average in operating expenses aggregates to over $26 million in annual savings, dropping directly to our bottom line.

 Turn to slide 13. Commencing in Q3, a large increase in [Brazilian] iron ore exports pushed Cape daily earnings up sharply to over $42,000 a day, the highest level since November 2010, but have corrected to around $18,000 recently. Panamax rates more than doubled from $7,200 at the end of August to $15,600 and have also contracted to around $10.800.

 Supramax rates increased from $9,800 to $14,400 a day and remain at these levels, benefiting from the Northern Hemisphere grain export season and increasing coal shipments. I want to point out that despite the recent rallies, levels remain at well below historic averages.

 For the balance of 2013 there is a slowing trend in fleet growth, along with significant additional iron ore export capacity from both Brazil and Australia, should support rates, especially in the Capesize sector. Both the Panamax and Supramax sectors should benefit over the medium to long term by Chinese coal and grain imports. (inaudible) the slowdown in deliveries combined with the gradual recovery of the world economy should bode well for improving fundamentals for 2014 and beyond.

 Please turn to slide 14. While GDP continues to be driven by developing economies, which now contribute a higher percentage to total world growth, and the developed economies, representing over half of the global consumption of most commodities. The IMF projected world growth for 2014 of 3.6%.

 Developing economies are projected to grow at 5.1%. Chinese economic growth is projected at 7.3% in 2014.

 [Noted] in significant GDP movement is the shift of Europe from a negative 0.8% at the beginning of the year to a positive 1.1% projected for 2014. This is an almost 2% movement within a year in an economy the size of the US.

 Turning to slide 15. The primary engines of trade will continue to be China and India. Drybulk trade has expanded at an average of 5.5% per month per year in the last 12 years since China joined the WTO.

 Consensus forecasts for full-year 2013 are for global drybulk trade to grow approximately at 5% and ton-mile growth of about 7%. Net fleet growth is expected to be about 5%, leading to a favorable supply/demand dynamics for the first time in four years.

 Moving to slide 16. Iron ore from the major mining companies outside of China continues to be of the lowest cost, highest quality source of this commodity, with iron ore prices forecast to decline to the $100 range, Chinese domestic production -- which is represented by the red box in the lower right graph -- will become uneconomic.

 The currently planned expansion of global iron ore mines will add significantly to seaborne bulk commodity movements in 2014, with further significant growth in the following years. While the majority of these expansions are in Australia, over 35% will come from the Atlantic Basin, adding to ton-miles.

 Moving to slide 17. The continued development in urbanization of China will contribute significantly to steel consumption for the remainder of the year and beyond. Infrastructure, housing construction, and consumer spending growth underpin future development. Note that Chinese fixed asset investments have continued to grow at over 20% year-on-year through the end of October.

 Crude steel production in China in October was up about 10%, more than the same period last year. Chinese iron ore imports were also up about 10% in the first nine months of 2012.

 Imported stockpiles have been drawn down steadily from 98 million tons and currently sit at about 80 million tons at the end of last week. Domestic iron ore production increased 7% year on year, but quality remains to be -- seems to be deteriorating, as expected iron ore content hovers in the 15% to 20% range, compared to 63% range content of imported iron ore. Going forward, the substitution of low-quality domestic iron ore with imported ore is expected to grow and will increase the tons carried and ton-miles.

 Please turn to slide 18. Over the past few years there has been a significant change in the coal trade. China turned from being a net exporter of coal in 2009, only four years ago, to being the world's largest importer today.

 As the charts indicate, both India and China's seaborne coal imports have grown at least 20% CAGR since 2009. With the increase in steel production and with the number of planned new coal-fired power generators, coal imports in both countries are forecast to grow over the next several years. Just those two countries account for over 30% of all seaborne coal movements worldwide.

 Please turn to slide 19. Scrapping rates for older vessels, less fuel-efficient vessels, have continued at high rates this year. Through November 22, about 20.3 million deadweight has been scrapped. If this trend continues, scrapping should reach about 23 million metric ton deadweight in 2013, becoming one of the highest yearly totals in deadweight terms.

 The current rate environment should encourage scrapping of older vessels. About 10% of the fleet is over 20 years old, providing about 70 million deadweight of scrapping potential.

 Please note that the current 2013 scrapping totals already include 23 ships that were 20 years old or younger, including five that were less than 15 years of age and one that was 10 years old. As the [ocean] prices appear to be dependent on the world steel prices and not the supply of vessels, they are expected to remain high, and we believe we will continue to see the scrapping of older, less efficient vessels.

 Of note is that the average age of the fleet stopped declining in August at 9.3 years, and stood at 9.4 years as of the end of October. This is an indication that newbuilding deliveries have slowed, as we predicted earlier in the year.

 Moving to slide 20. Net fleet additions in 2013 are expected to be significantly lower than last year. Non-deliveries in October amounted to 40%. This combined with the high scrapping means that net fleet growth should be about 5%, which should be lower than the expected increase in demand during 2013. The order book declines dramatically through 2014 and beyond and is expected to remain [there] as banks continue restrictions on newbuilding loans.

 Please turn to slide 21. Slide 21 provides a retrospective on the rate environment and [continued] impact of supply/demand equilibrium on a rate recovery for 2013. As we all know, for any rate recovery to be meaningful and lasting, fleet growth rates need to fall below trade growth rates.

 As mentioned earlier, demand for drybulk cargo is expected to increase for the full-year 2013 by over 5%, a rate similar if not higher than the expected net fleet growth for the year. However, the rate of change suggests that the demand for drybulk vessels will increase in 2014 and beyond, as newbuilding deliveries continue to decelerate and scrapping remains at record levels.

 In sum, we note the first time in four years there is an expectation that cargo demand growth could exceed net supply growth. We note this, as these conditions were not evident over the past few years.

 This concludes my presentation. I would now like to turn the call over to George Achniotis, our CFO, to go over our financial highlights and review our subsidiaries. George?

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 George Achniotis,  Navios Maritime Holdings Inc. - CFO   [4]
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 Thank you, Ted, and good morning, all. Please turn to slide 22 for a review of the third-quarter and the nine-month financial highlights.

 Before I begin the review on the financials I would like to remind you that the comparison between 2012 and 2013 reflects the effects of the restructuring of our credit default insurance. Of the $175 million cash we received in Q4 of 2012 from the restructuring, approximately $52 million was allocated to 2015. This represents about $3,350 per vessel per day. Because of this, a more meaningful comparison of our Q3 results would be a sequential one with Q2 2013.

 Revenue in the quarter decreased to approximately $122 million from $164 million in 2012. The revenue from drybulk operations reduced to approximately $73 million from $99 million in the same period in 2012.

 The decrease is caused mostly by a reduction in the daily TCE [per] in the quarter from $18,785 in Q3 2012 to $12,085 in Q3 2013. This does not take into account the reduction of the $3,350 per day due to the additional payment from the restructuring of the insurance.

 One way to view the Q3 2013 TCE rate will be to add this back, resulting in a rate of approximately $15,500 per day. The decrease in TCE was mitigated somewhat by a 10% increase in the available base of the fleet.

 Revenue from the Logistics business also decreased by about $15 million in the quarter mainly as a result of a decrease in the sale of products at the port in Paraguay. I note that this is a low-margin, low-risk opportunistic trading business.

 EBITDA for the quarter reduced to approximately $41 million compared to $61 million in the same period last year. The reduction was mainly due to the reduction in revenue and was mitigated by a $15 million decrease in Navios Logistics' expenses mainly due to the reduction -- reduced volumes of product sold; $2 million reduction in direct vessel expenses; a $1.4 million decrease in G&A expenses; a $3.2 million increase in equity from affiliated companies; and a $1 million decrease in other expenses.

 EBITDA between Q2 and Q3 2013 increased by about 5%. This reflects our open days capturing a rising market.

 Net income for the previous reduced from $5 million in 2012 to a negative $13 million in 2013. The reduction is mainly attributable to the same factors affecting the reduction in EBITDA and was partly offset by a $2.2 million decrease in G&A and a $1.1 million increase in income tax benefit from Navios Logistics.

 Turning to the highlights of the nine-month period ended on September 30, EBITDA decreased to $118 million from $184 million in 2012. Similar to the quarterly results, the main reason for the decrease was the reduction in the TCE rate achieved in the period.

 The decrease was mainly mitigated by a cost control effort as we also reduced G&A expenses by $6.6 million, direct vessel expenses by $7.4 million, and other expenses by $12 million. This shows our continued commitment in reducing fleet operating expenses well below the industry average. The reduction in EBITDA was also mitigated by a $9 million decrease in the cost of products sold in Logistics and $12.8 million increase in equity net earnings from our affiliated companies.

 The result of Navios Logistics increased by over 14% to $42.5 million from $37 million in 2012. Net income for the nine-month period reduced from $19 million in 2012 to a negative $39 million in 2013. The decrease is mainly attributable to the decrease in EBITDA and an increase in interest expense. The decrease was partly mitigated by a $5.3 million decrease in depreciation and amortization, a $5.3 million increase in income tax benefit, and a $1.6 million in share-based compensation expense.

 Please turn now to slide 23. We continue to maintain a strong balance sheet with no leverage and a healthy cash balance. At September 30, 2013, which had $220 million cash, compared to $283 million at December 31, 2012.

 The current portion of long-term debt reduced from $33 million at year-end to $26 million at the end of September 2013. The long-term portion of our bank debt increased slightly to $305 million compared to $291 million at the end of December, following the delivery of the four Panamax vessels in the quarter.

 Senior notes increased by $93.6 million, following the add-on to the Navios Logistics bond in March of 2013. Following the [raise] and the refinancing of our 2017 bond, we don't have any significant debt maturities until 2019.

 The net debt to book capitalization ratio remains low at below 48%. This is a low ratio for a shipping company operating in a capital-intensive industry. It is particularly strong as we are at the low point in the cycle.

 Furthermore, I would like to remind you that the full market value of our investments in our affiliated companies is not reflected in our balance sheet. If these investments were valued at their current market values, our leverage ratios would be even lower.

 Turning to slide 24. The Company continues to provide returns to shareholders through its dividend, which has been paid continuously from the first full quarter it went public. A dividend of $0.06 per share was returned to common shareholders as of December 12, to be paid on December 20.

 I would also like to point out that the total annualized cash dividend inflows from our ownership in Navios Partners and Navios Acquisition is approximately $44 million. This exceeds the annual dividend paid out by Navios Holdings by $19 million.

 We will now briefly review our subsidiaries. Please turn to slide 25. We currently own 21.6% of Navios Partners, including a 2% GP interest. Navios Partners operates a fleet of 30 vessels equaling 3.1 million deadweight tons with an average age of 6.6 years. Since its inception in 2007, Navios Partners' fleet has grown by almost 4 times from 8 vessels to 30.

 Please turn to slide 26. Navios Partners provides significant cash flow to Navios Holdings. Since the start of operations, Navios Partners has grown distributions by over 26%, [but] through 2013 we received about $136 million and distributions.

 In 2013, we expect to receive about $29.5 million in distributions from Partners. This exceeds the dividends that Navios Holdings is expected to pay to shareholders by almost $5 million.

 In addition to the distributions, there has been 125% appreciation of our investment in Navios Partners, which as mentioned earlier is not reflected on our balance sheet.

 Please turn now to slide 27. We have an approximate 51% economic interest in Navios Maritime Acquisition. Navios Acquisition's current fleet consists of 44 tanker vessels totaling 5.1 million deadweight tons. 34 vessels are currently in the water with an average age of 4.6 years. We anticipate that NNA's newbuilding program for seven product tankers and a recent acquisition of three modern VLCCs positions NNA to take advantage of favorable long-term industry dynamics.

 Please turn to the next slide. NNA is summarized on slide 28. It has a large, modern, and diverse tanker fleet worth more than $1.5 billion.

 NNA has long-term contracted revenue with a diverse group of strong counterparties. This contracts are for rates well above the company's low operating breakeven. This cash flow can sustain NNA in uncertain market conditions.

 NNA has profit-sharing arrangements on about 86% of its contracted fleet. This arrangement limits the downside risk of the base rate and allows NNA to enjoy the upside volatility. Year to date, profit sharing provided $4.4 million.

 Turning to slide 29, this slide shows how NNA's fleet has grown since 2011 and how this will continue to grow as newbuilding vessels deliver into the fleet next year. Available dates have grown from just over 4,000 in 2011 to over 9,500 in 2013; and they will grow to over 14,000 in 2014 with further growth in 2015 when all vessels deliver into the fleet.

 EBITDA has grown by 33% in 2012 over 2011 and will continue to grow as NNA takes delivery of new vessels. EBITDA for the first nine months of 2013 has grown by 23%, compared to the same period last year.

 Please turn to slide 29. Navios Acquisition provides significant cash flow to Navios Holdings. Including the expected dividends in 2013, Navios Acquisition has provided about $20.5 million in distributions since its start of operations. The value of Holdings' interest in Navios Acquisition has also grown over the past three years by more than 14%.

 This concludes my presentation. At this point I will turn the call over to Ioannis Karyotis for his review of the Navios South American Logistics results. Ioannis?

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 Ioannis Karyotis,  Navios South American Logistics Inc. - CFO   [5]
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 Thank you, George. Slide 31 provides an overview of Navios Logistics, in which Navios Holdings owns 63.8% stake. Navios Logistics has three segments: the port terminals, the barge business, and the sabotage business. As Angeliki already mentioned, we recently signed an important new contract with Vale that marks the expansion of our port business in (inaudible) [north] transshipment.

 Slide 32 presents the highlights of Navios Logistics. We are one of the major logistics providers in the Hydroid region of South America. We see significant opportunities to grow our business, but maintain our focus on contracted revenues from a portfolio of high-quality clients providing [business] and cash flows.

 Please turn to slide 33. We have a 20-year agreement with Vale International, a subsidiary of Vale S.A., for the storage and transshipment of iron ore. Vale guarantees a minimum quantity of 4 million tons per year.

 This contract will more than double our drybulk terminals business, considering we now move about 4 million tons of grains per year. To offer these services we will invest approximately $150 million to expand our port terminal infrastructure.

 Upon completion of the expansion, the facility will have 6 million tons annual throughput capacity with potential to increase to 10 million tons. We expect to generate a minimum of about $35 million EBITDA annually, or about $1 billion over the 20-year contract period including annual tariff escalations.

 In October we exercised our option for 36 additional newbuilding dry barges in China, increasing our total order to 72 barges. That will be for the six [grain] barge convoys. We are [attaining] the competitive all-in cost of $756,500 per barge.

 We have already secured 6-year employment for four of the convoys under time-chartered contracts at $14,500 per day per convoy. We expect to generate $13.2 million annual EBITDA from the four convoys, or $3.3 million per convoy.

 As shown on slide 34, this (inaudible) barge is almost double the size of a Mississippi barge. Together, they will form more efficient 12-barge convoys that will carry approximately 44% more cargo (inaudible) compared to a 16-Mississippi barge convoy. With fewer barges per convoy we expect to save time used to form, load, and unload the convoy and [tendering] days cargo transported.

 Therefore, for these convoys we are able to command high rates (inaudible) average. At the same time, operating costs, which mainly [stem] for the [usual] will be similar. When the newbuilding barges have been delivered, about 40% of our dry barge fleet will be of the new design.

 Please turn to slide 35. In the past three years, revenue has been growing at 14.6% CAGR. At the same time, EBITDA has been growing at 21.7% CAGR. In the nine months of 2015, EBITDA increased by 14.2%, compared to the same period last year.

 Please turn to slide 36; this covers also the third quarter and the nine months of 2013. Our EBITDA for the third quarter was $10.8 million, 18% lower compared to Q3 of 2012. Net loss for the period was $1 million, compared to a net income of $0.9 million in Q3 2012.

 Port segment EBITDA increased by 20% to $8.3 million due to more storage revenues in both the dray and the liquid ports. The decrease in revenue is attributed to lower sales of (inaudible) product in our liquids port that were $1.3 million in Q3 2013, compared to $16.2 million in Q3 2012. Since this is a complementary low-margin activity, it did not have a significant impact on EBITDA.

 Barge business EBITDA was $1.3 million in Q3 2013 compared to $4 million in the same period last year. The decrease is attributed to less revenue from liquid cargo transportation and higher repair and maintenance costs in the quarter.

 Cabot age business EBITDA was $1.3 million in Q3 2013 compared to $2.3 million in Q3 2012, mainly due to more hire days in the quarter. Interest expense and finance costs net increased to $6.5 million in Q3 2013 compared to $5.1 million in Q3 2012, due to the add-ons to the bond in March.

 Depreciation and amortization expense was $5.8 million in Q3 2013 compared to $7.2 million in Q3 2012. Our net result was also (inaudible) affected by $1.1 million higher tax benefit compared to the same period last year.

 The nine-month period ended September 30, 2013, best reflects our operational improvement as EBITDA grew 14% compared to the same period last year. Net income was $9.4 million, up from $0.9 million in the nine-month period of 2012.

 Please turn to slide 37. Slide 37 shows our strong balance sheet. As of September 30, 2013, cash was $111.7 million compared to $45.5 million at the end of 2012. Net debt to book capitalization was 32%, compared to 33% at the end of 2012.

 As of the end of Q3, the remaining CapEx for the acquisition was the 72 barges and the (inaudible) is approximately $53 million. Now I would like to turn the call back to Angeliki.

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 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman, CEO   [6]
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 Thank you, Ioannis, and 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) Christian Witherbee, City.

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 Seth Lowry,  Citigroup - Analyst   [2]
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 Good morning. This is Seth Lowry in for Chris. If I could start off with your core drybulk operations, could you just remind us on your long-term chartered-in fleet and on the Claymore vessels that you hold purchase options on, how many of those are you able to purchase in the next 18 months or so?

 Are those option prices fixed? Can you maybe given indication of the level of your willingness to purchase those vessels?

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 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman, CEO   [3]
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 We have to be -- we have about two vessels that we are going to -- three vessels that we are going to decide. But we have multiple years.

 And it's [fee] escalating, so it is in the money, but we don't find any reason why we should exercise it now. We can wait for another two, in cases two years, two or three years.

 We have total purchase option of 11. It is a sizable [upswing].

------------------------------
 Seth Lowry,  Citigroup - Analyst   [4]
------------------------------
 Okay, thanks. Given where -- given the level of current rates across I guess multiple drybulk asset classes, and considering how close you are to an increasing distribution at Partners, does it make sense to start chartering out some of these open vessels a bit longer-term for consideration for drop-down. Or are the rates just not at a level where you are comfortable doing that?

------------------------------
 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman, CEO   [5]
------------------------------
 I think that if we see nice margins we will do it anyway. This is a strategy of Navios; when we see nice profits and nice margins we always like to lock in.

 Today we don't see that as the point where you will grow on the three- to five-year horizon. You will keep it a little bit shorter, which we see as a good opportunity of creating nice cash flows for the NM.

------------------------------
 Seth Lowry,  Citigroup - Analyst   [6]
------------------------------
 Okay, and then lastly, do you see the -- I guess call it recent blip or small dip in rates over the past month or six weeks as just normal seasonality? Or is there something more structural that you see in the market that is maybe compressing things here over the near term?

------------------------------
 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman, CEO   [7]
------------------------------
 The very big difference in the market is that last year, let's say, the high of the -- you had about 1,000 BDI; this year you had the BDI between 1,500 now and 2,000. So it's a totally material difference, between 50% and 0.5% higher.

 So seasonally you are stronger. Also, what you have today is you have period charters. So you have one- and two-year and three-year deals that you can do very quickly.

 So [optimism] here. Of course, as we always stated, you will have softness and then recovery. The overall trend is upward.

 Also, I think that you have a little bit -- a couple of weeks earlier the softness; usually it's a little bit further down, about 2 weeks later. But I wouldn't read too much into that. The fundamentals are good.

------------------------------
 Seth Lowry,  Citigroup - Analyst   [8]
------------------------------
 Okay. All right. Thank you very much. I will turn it over.

------------------------------
Operator   [9]
------------------------------
 Omar Nokta, Global Hunter Securities.

------------------------------
 Omar Nokta,  Global Hunter Securities - Analyst   [10]
------------------------------
 Hi, thank you. Good morning or good afternoon. Just had just a few questions on the Logistics business. You guys have been obviously extremely busy building out that segment. First just wanted to get some clarity on the Vale contract.

 Obviously I believe the existing terminal you have in Uruguay is about 4 million tons annually. Would this expansion be a completely incremental 6 million tons, taking up total potential capacity to say 10?

------------------------------
 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman, CEO   [11]
------------------------------
 Yes. Actually in the grain you have 4 million. We completed a conveyor belt that this will give us the ability to almost double the throughput. So on the grain you already have completed this CapEx, about $22 million, which added this capacity.

 On additional land we have in the port we will do a separate facility which is just for iron ore. That will provide the 4 million minimum throughput for Vale, 6 million contract, and ability to go to 10.

------------------------------
 Omar Nokta,  Global Hunter Securities - Analyst   [12]
------------------------------
 Okay, thank you. What is the timing on that?

------------------------------
 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman, CEO   [13]
------------------------------
 The timing is that we are now in -- we have regulatory approvals which we don't believe they will be complicated, because it is just an extension on an existing facility that exists from the 1950s. And you should have around a 12- to 18-month completion.

------------------------------
 Omar Nokta,  Global Hunter Securities - Analyst   [14]
------------------------------
 Okay. Then, obviously, the investment capital of $150 million is pretty cheap considering the $35 million of EBITDA. That is just about 4, 4.5 times EBITDA, which is extremely cheap.

 Is there -- are there any certain tax implications? Or should we just look at 4.2 times as a realistic cash flow figure?

------------------------------
 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman, CEO   [15]
------------------------------
 There is not tax implication. As you know, we are in a tax-free zone, so you are very accustomed that this is not part of any taxation.

 And the $35 million applies on the minimum throughput. I just want to remind that.

------------------------------
 Omar Nokta,  Global Hunter Securities - Analyst   [16]
------------------------------
 Sorry, so --?

------------------------------
 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman, CEO   [17]
------------------------------
 $50 million is on -- in the 6 million is the contract.

------------------------------
 Omar Nokta,  Global Hunter Securities - Analyst   [18]
------------------------------
 Got you. Okay. Then I just wanted to get some clarity also on the convoys. I remember last quarter you discussed investing in the total of three convoys via three pushboats and 36 barges. Then I think at the time you had said something about entering into an LOI for seven-year charters on those.

 And this -- I just wanted to compare that with what you are saying today. It looks like you have bumped it up, three to six; and now there is four charters for six years. Are these replacing the three from before?

------------------------------
 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman, CEO   [19]
------------------------------
 No, this is -- the four contracts is what originally we said three. Actually we completed four, and we did it for seven years instead of six. So we materially improved the -- it's four convoys; instead of seven years, it is completed firm at six.

 And the rate is on this -- this is a new jumbo type and you can see that the time charter rate is significantly higher than previously on the previous convoys. And that is going to be done with these newly ordered from China barges and fully rebuilt pushboats.

------------------------------
 Omar Nokta,  Global Hunter Securities - Analyst   [20]
------------------------------
 Okay. Then just one final one, obviously now with the EBITDA starting to really crank up here, I think your run rate on the year is somewhere around $55 million, $60 million. Then taking into account these convoys and port expansion, you are going to be up at that $100 million level over the next couple of years, if not sooner.

 What do you think about timing of potentially separating the Logistics segment into its own listing?

------------------------------
 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman, CEO   [21]
------------------------------
 We have articulated a willingness on that. I think the issue today with the port is that you want to have the patience to see it materialize in your numbers.

------------------------------
 Omar Nokta,  Global Hunter Securities - Analyst   [22]
------------------------------
 Okay. That's fair. Thanks very much.

------------------------------
Operator   [23]
------------------------------
 Ben Nolan, Stifel.

------------------------------
 Ben Nolan,  Stifel Nicolaus - Analyst   [24]
------------------------------
 Yes, thank you guys for taking my question. I actually have a couple. First of all, on the South American side, just wanted to catch up maybe on the Panamaxes that you guys have the contract with Petrobras. Have there been any changes in that? Have you found any yards, or getting close to seeing that materialize at all?

------------------------------
 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman, CEO   [25]
------------------------------
 I think that is one we have an option; it is an obvious option. We haven't seen yet completing of any shipyard.

 There was a major disruption there in the market. So at this point it is an option, and if it -- if we find the correct shipyard we will materialize it.

------------------------------
 Ben Nolan,  Stifel Nicolaus - Analyst   [26]
------------------------------
 Okay, so it seems as though that Petrobras as well in the yard is moving a little slowly. But ultimately they are probably going to need the tonnage.

 Do you think there is the chance that you might be able to compete to use international assets to fill that contract at some point if the domestically built capacity isn't ready to go yet?

------------------------------
 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman, CEO   [27]
------------------------------
 The reality is that Navios is a global business, a global company, and we are able to adapt. If that happened we will be very easily able to fulfill this obligation in the international markets.

 You have to realize in the same way we use our contacts in China to build the barges very competitively. So this is something that we will actually leverage across regions, and we have the ability on any scenario to fulfill the contract.

------------------------------
 Ben Nolan,  Stifel Nicolaus - Analyst   [28]
------------------------------
 Okay, perfect. Then switching gears for a second, with respect to Navios Europe and the HSH agreement, looks as though that it is moving forward. But has there been any further discussions about maybe expanding the scope of that relationship?

 Or, I don't know, maybe could you just frame where you see that developing? Is it moving in the direction that you thought it was going to?

------------------------------
 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman, CEO   [29]
------------------------------
 It moves in the direction we like, but it moves slowly. To our surprise. We thought it will take long but we can say that this goes very slowly.

 And we are here to -- I mean, it will go but most probably any other deal will be next year.

------------------------------
 Ben Nolan,  Stifel Nicolaus - Analyst   [30]
------------------------------
 Okay, all right. Well, no, that is helpful, and that does it for my questions. I appreciate it.

------------------------------
Operator   [31]
------------------------------
 At this time there are no further questions. I will now return the call to Angeliki Frangou for any additional or closing remarks.

------------------------------
 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman, CEO   [32]
------------------------------
 Thank you. This completes our Q3 results.

------------------------------
Operator   [33]
------------------------------
 Thank you for participating in today's conference call. You may now disconnect.






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