Q3 2014 Navios Maritime Holdings Inc Earnings Call

Nov 24, 2014 AM EST
NM - Navios Maritime Holdings Inc
Q3 2014 Navios Maritime Holdings Inc Earnings Call
Nov 24, 2014 / 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 Corporation - President
   *  George Achniotis
      Navios Maritime Holdings Inc. - CFO
   *  Ioannis Karyotis
      Navios Maritime Holdings Inc. - SVP Strategic Planning

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Conference Call Participants
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   *  Ben Nolan
      Stifel Nicolaus - 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 third-quarter 2014 earnings conference call for Navios Maritime Holdings. With us today from the Company are Chairman and CEO, Ms. Angeliki Frangou; President, Mr. Ted Petrone; Chief Financial Officer, Mr. George Achniotis; and SVP of Strategic Planning, Mr. Ioannis Karyotis.

 This conference call is being webcast. To access the webcast, please go to the Investors section of Navios Maritime Holdings' website at www.Navios.com; you will see the webcast link on the page.

 I would now like to read the Safe Harbor statement. This conference call could contain forward-looking statements within the meanings of the Private Securities Litigation Reform Act of 1995 about Navios 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 Holdings' management and are subject to risks and uncertainties which could cause the 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 herein should be understood in light of such risk. Navios Holdings does not assume any obligation to update the information contained in this conference call. Thank you.

 We will begin this morning's conference call with formal remarks from the team, and after we will open the call to take 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 with our results for the third quarter of 2014, for which we reported EBITDA of $42.4 million, a 5% increase compared with the same period last year.

 As a result, we have announced a dividend of $0.06 for the third quarter of 2014, representing a gain of about 4.2%. I note that we have paid this dividend uninterrupted for nine years, regardless of the environment.

 Slide 3 highlights our current corporate structure. As you can see, we recently added a new member to the Navios family, Navios Maritime Midstream Partners, in which Navios Holdings owns an indirect economic interest of about 27%. We were pleased to successfully conclude the IPO despite the unexpected headwinds that developed in the energy space and view the success as a tribute to the strength of the Navios brand.

 The value of the Navios Holdings primarily derives from five areas: the drybulk fleet within Navios Holdings, and four principal subsidiaries. In our view, the whole is still valued at less than the sum of the parts.

 Today the Navios Group controls 149 vessels and is a significant force in the shipping industry. Navios Logistics is a major player in the Hidrovia region of South America and is in the process of expanding its port to support the Vale contracts, which we expect to generate a minimum of $35 million in annual EBITDA over a 20-year period.

 Slide 4 highlights Navios Holdings' efforts towards positioning the Company to maximize returns regardless of the industry cycle. At the end of the third quarter, we had almost $300 million of liquidity. We had improved our net debt to book capitalization by 8% to 47.7% and have no significant debt maturities until 2019.

 Our decision to access the preferred equity market significantly improved our balance sheet and diversified our sources of capital. When market conditions allowed it, we raised $170 million of redeemable perpetual preferred stock in 2014. This preferred equity is reasonably priced and is particularly attractive to our common stock investors, as Navios was able to raise permanent capital without diluting its stockholders.

 I am going to discuss in greater detail in a moment we have been devoting substantial energy and management efforts to develop scale and operating efficiencies. We have developed significant capabilities including in-house technical and commercial management for our vessels and are realizing the favorable effect of network economies through my offices in Europe, US, South America, and Far East.

 Information flow is better and translating into advantages for all companies within the Navios Group. In addition, our in-house technical abilities have enabled Navios Holdings to develop an operating expense that is about 32% less than the industry average.

 Over the years, Navios Holdings has developed a chartering strategy to maximize market returns and minimize market exposure throughout the cycle. When conditions were favorable, we entered into long-term charters. Today, when the market is less robust, we have focused on reducing our operating breakeven so that we can prepare for the next upturn.

 Looking forward into 2015, we expect our cash flow breakeven rate to be at about $9,500 per open day, which is way below current market rates. We are almost 100% fixed for 2014 and 18% fixed for 2015.

 Navios Holdings also derives significant value from its subsidiaries. We expect to receive almost $45 million in annual dividends from our public subsidiaries; and our investment in Navios Partners and Navios Acquisition have already grown to a market value of $435 million.

 Investments in our subsidiaries are going to [accrue] and further strengthen our position in the shipping industry. We also have a 10-year option to acquire the GP/Incentive distribution rights of our recently IPO-ed company, Navios Midstream Partners. In summary, our strong balance sheet, low cost structure, operating efficiencies provide flexibility to our chartering strategy maximizing the Company returns.

 Slide 5 covers certain recent developments. As mentioned earlier, Navios Acquisition recently IPO-ed Navios Midstream Partners and raised $121.5 million in proceeds through the process. Navios Midstream Partners is a new platform in the war chest for dividend-seeking investors, bringing flexibility and liquidity to Navios Acquisition and, indirectly, value to Navios Holdings. We also recently purchased a 2012-built South Korean Capesize vessel for $51.4 million and have arranged financing for about 60% of the purchase price.

 Slide 6 highlights our strong liquidity position. We have a conservative balance sheet with net debt to book capitalization of 47.7% and cash of $292 million. Our liquidity should be viewed in the context of our cash requirements: the Company has no unfunded CapEx, no material debt maturities until 2019. As a result, our liquidity is dedicated to the expansion opportunities and our operating needs.

 Slide 7 provides an overview of the significant competitive advantage and operating leverage I mentioned a few moments ago. As you may know, I have been deeply immersed in this effort because I believe it is an essential skill for a transportation company.

 Unlike many of our competitors, we manage our vessels. We believe that by doing so, our Company is better managed and our stakeholders enjoy significant efficiencies -- often most noticed in bad times than good, but important always.

 Focusing on Navios Holdings, you can see that Navios Holdings has developed significant efficiencies from economies of scale proven by daily operating expenses being 32% below the industry average and our general and administrative expense being below our public peers.

 We believe that we have demonstrated Navios Holdings can achieve economies of scale and share these cost savings and benefits of economies of scale with members of the Group, ultimately to the greater benefit of our stakeholders. You can see the benefits of achieved can transfer to our affiliate entities, supported by Navios Partners' operating expenses, which is 21% below the industry average; and Navios Acquisition's effect, which is 17% below the industry average. As a significant portion of our value of Navios Holdings is through these entities, it is important to that we are able to manage operating expense costs well.

 Slide 8 sets forth Navios' low cost structure. As mentioned earlier, for 2015 we have 18% of our available days at a Navios contracted daily charter-out rate of $20,062, well above our fully-loaded cost of a $11,856 per day.

 Our fleet [post] and [Group] open days, plus days contracted with index-linked charters, that would provide us upside incremental revenue with an improving charter market. I remind you, as I do in every quarter, that our breakeven analysis includes all our operating expenses, drydock expenses, charter-in expenses for our charter-in fleet, general and administrative expense, as well as interest expense and capital repayments.

 Slide 9 provides details surrounding the Company chartering strategy in capturing market upside while protecting the market downside. Our estimate for 2015 breakeven costs for our Company including all costs is $9,524 per vessel per open day.

 Our low daily cash breakeven rate allows Navios Holdings to enjoy significant cash flow regardless of whether markets return to historical norms. Based on our current market rate of $11,337 per day, and using 15,844 open days for our fleet, we expect to have $2 million in free cash flow from our Core Fleet. However, should they revert to historical averages, which are approximately $20,513 per day for the 20-year average and $27,890 per day for a 10-year average, we could earn $156 million or $281 million in free cash flow, respectively.

 As this slide illustrates, by acquiring assets at attractive values and using innovative methods to keep our costs low, we are well positioned for a market recovery. I would now like to turn the call over to Mr. Ted Petrone, Navios' President, who will take you through Navios' operations and an industry perspective. Ted?

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 Ted Petrone,  Navios Corporation - President   [3]
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 Thank you, Angeliki. Please turn to slide 10.

 Our Core Fleet consists of 64 vessels totaling 6.4 million deadweight. We are one of the largest drybulk operators in the world. We have 55 vessels on the water, with an average age of 7.5 years. This is 16% younger than the industry average of 8.9 years.

 Please turn to slide 11. We have fixed about 97% of our capacity for 2014. We have fixed about 18% 2015; the remaining open days are available for hire in an improving environment.

 The average daily charter-out rate for our fleet is $12,167 for 2014. For 2015 it's $20,062.

 And as Angeliki previously mentioned and is down at the bottom of this slide, our vessels' operating expenses are 32% below the industry average in all asset classes. This reflects, among other things, the significant economies we have achieved with scale. The $1,801 daily savings per vessel as compared to the industry average in operating expenses aggregate about $24 million in annual savings dropping directly to our bottom line.

 Please turn to slide 12. In contrast to the seasonal pattern of last year's slower world trade during the latter part of Q3, which set the BDI's lowest quarterly average since Q2 2013 at 950, only the Capesize sector saw a quarterly earnings improvement on the back of record Chinese iron imports from Australia. Q3 also sold the lowest quarterly average (technical difficulty) since 2001.

 The key difference between the Q3 2014 and Q3 2013 was lower coal imports in both Europe and China. Since the end of Q3, the BDI rose to its highest level since March, at 1,484 in mid-November, driven in large part by the rise in Cape spot rates from $7,900 late in October to a 10-month high of $26,800 a day due mostly to increased iron ore shipments from Brazil. Since then, Cape rates have traded down slightly.

 Weak Chinese coal imports have negatively affected the Panamax and Supramax rates over the past several months in spite of a very strong US grain export season. A slowing trend in fleet build for the remainder of this year, along with significant additional iron ore exports from both Brazil and Australia in advance of the winter and pre-Chinese New Year stock-up, should support earnings especially in the Capesize sector.

 Both the Panamax and the Supramax sectors should receive support over the medium to long term with Indian coal imports, which would alleviate the current very low stock levels.

 Please turn to slide 13. While GDP continued to be driven by developing economies, it is now contributing a higher percentage of the total world growth than the developed economies, representing over half of the global consumption of most commodities. The IMF projected global GDP growth for 2014 and 2015 at 3.3% and 3.8%, respectively, led by emerging and developing markets growth of 4.4% in 2014 and 5% in 2015.

 All these projections were made before the recent circa 30% drop in oil prices. If oil prices remain at these levels, worldwide economic activity should benefit.

 Turning to slide 14, the primary engines of the trade growth continue to be China and India. Drybulk trade has expanded by now just 5.5% per year in the 12 years since China joined the WTO.

 Forecasts in 2014 are for global drybulk trade to grow approximately 6%; and some model growth of about 7%. Net fleet growth is expected to be about 4.8%, leading to continued favorable supply/demand dynamics, a change that has recently come into place.

 Moving to slide 15, iron ore from the major mines outside China continues to be the lowest-cost, highest-quality source of this commodity. With iron ore prices currently at the $70 a ton range, Chinese domestic production -- represented by the red boxes in the lower right graph -- will become uneconomic and will be substituted by imports.

 The currently planned expansion in global iron ore mines that will come online over the next years will add significantly to seaborne bulk commodity movements. While the majority of these expansions are in Australia, this year about 40% will come from the Atlantic Basin adding to ton-miles. I would like to remind you that our industry is driven by volumes moved and not by commodity pricing.

 Moving to slide 16. Continued development and urbanization of China will contribute significantly to steel consumption for the remainder of 2014 and beyond. Infrastructure, housing construction, and consumer spending growth underpin future development.

 Note that Chinese fixed asset investments continue to grow at over 15.9% year-on-year through October, led by railway and social housing construction. The year-on-year industrial production growth of 7.7% through October reflects continued infrastructure as well as manufacturing growth.

 Through October 2014, crude steel production in China was up 5% year-on-year. Chinese iron ore imports were up 16% year-on-year. Domestic iron ore production increased by about 7%, but quality seems to be deteriorating as effective Fe content hovers around the 15% to 20% range compared to the 63% of the [corridor].

 Based on this data, it seems that the substitution of low-quality domestic iron ore with imported iron ore is occurring. This trend is expected to continue and will increase times chartered and ton-miles.

 Please turn to slide 17. 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 five years ago, to being the world's largest importer today.

 As the charts indicate, both India and China's seaborne coal imports have grown over 20% CAGR between 2009 and the projected 2014 total. With projected increases in steel production and coal-fired power generation, coal imports from both countries are forecast to grow over the next several years. Although Chinese coal imports have been flat this year, the recently signed Free Trade Agreement between China and Australia removes the tariff barriers China recently announced, setting up the potential for stronger imports going into next year.

 Turning to slide 18. China's grain imports are expected to double from 2012 to 2022 as the country's per capita income rises, leading to an improved diet and increased consumption of poultry and red meat. As noted at the bottom of this slide, it takes about 8 tons of grain to produce 1 ton of beef. Grain shipments, while small relative to iron ore and coal, account for a large portion of vessel demand as measured in vessel days, as grain is an inefficient cargo to load and discharge.

 Moving to slide 19. Through October, 42.6 million deadweight tonnes delivered, indicating that total deliveries for 2014 are likely to be in the 15 million deadweight tonne range. The nondelivery rate through October was about 33%, led by nondeliveries at 14% and 39% for Panamaxes and Supramaxes, respectively.

 Net fleet growth this year is expected to be lower than last year, and there is expected to be lower net demand growth, resulting in an improved rate environment going forward. The order book declines dramatically this year and for the next three years afterwards.

 Turning to slide 20, scrapping rates for older, less-efficient fuel efficient vessels have continued this year. Through November 14, 13.7 million deadweight has been scrapped.

 The current rate environment should encourage scrapping of older vessels. About 9% of the fleet is over 20 years of age, providing about 68.5 million deadweight of scrapping potential.

 As we move to 2015, a further 16.2 million deadweight becomes 20 years old. Demolition prices appear to depend on overall steel prices, not on the supply of vessels, and are expected to remain high.

 Net fleet growth to the end of October was 4.2%, indicating that by the end of the year it will be around 4.8%, which is below the 6% expected cargo demand growth, leading to favorable supply-and-demand dynamics.

 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 21 for a review of the third-quarter and nine-month financial highlights. Revenue in the quarter increased by 25% to $153 million from $122 million in 2013. This was mostly driven by an increase in the revenue from the Logistics Business.

 EBITDA for the quarter increased by 5% to over $42 million compared to $141 million in the same period last year. The increase was mainly due to the increase in the EBITDA of Navios Logistics and a $1.6 million decrease in G&A expenses.

 Net loss in the period increased from $13 million in 2013 to $17 million in 2014. The increase is mainly attributable to an increase in depreciation and amortization due to the addition of new vessels in the fleet and a reduction in income tax benefit from Navios Logistics.

 Turning to the highlights of the nine-month periods ended on September 30, as in the previous quarter we have adjusted EBITDA and net income to exclude $17.4 million, being our portion of the loss on the Logistics bond extinguishment following the refinancing of the bond in Q2, and an $11.5 million write-down on available-for-sale securities. Excluding these events, EBITDA increased by 30% to $154 million from $118 million in 2013.

 The increase was mainly due to an increase in revenue from both the Core Fleet and the Logistics Business. The increase from the Core Fleet was due to a 17% increase in the operating days of the fleet as we took delivery of new vessels, and a 5% increase in the TCE rate a ship in the period compared to last year. EBITDA of Navios Logistics increased by 26% from $42.5 million to $53.5 million 2014.

 Net loss for the nine-month period reduced from $39 million in 2013 to $22 million in 2014. The improvement is mainly attributable to the increase in EBITDA; and it was partly mitigated by an increase in depreciation and amortization, an increase in interest expense, and a reduction in income tax benefit.

 Please turn now to slide 22, where key balance sheet highlights are presented. Our cash balance has increased significantly since the year-end. At September 30, 2014, we have $292 million in cash compared to $190 million in December 31, 2013.

 Despite a $107 million increase in total debt following the addition of new vessels into the fleet since the beginning of the year, and the refinancing of the Navios Logistics bond in April of 2014, leverage has reduced. The net debt to book capitalization ratio is now below 48%, compared to 51% at the end of the year.

 This is a low ratio for a shipping company operating in a capital-intensive industry. It is particularly strong as we are at a 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 the current market values, our leverage ratios would be even lower.

 Following the recent refinancing of our 2017 bond, we don't have any significant debt maturities until 2019.

 Turning to slide 23, the Company continues to provide a return to shareholders through its dividend, which has been paid continuously since 2005 when the Company went public. A dividend of $0.06 per share was declared to common shareholders as of December 11 to be paid on December 18.

 On January 15, the Company will also pay a dividend of $3.7 million to its preferred equity holders. The total expected cash dividend inflows from our ownership in Navios Partners and Navios Acquisition exceed by almost $5 million the annual dividend paid out by Navios Holdings to its shareholders.

 Over the next few slides we will now briefly review our subsidiaries. Please turn to slide 24.

 Navios Holdings owns 20% of Navios Partners, including a 2% GP interest. Navios Partners operates a fleet of 32 vessels: 25 drybulk and seven containers with average charter duration of over three years.

 Turning to slide 25, Navios Partners provides significant cash flow to Navios Holdings. Since it started operations, Navios Partners has grown distributions by over 26%; and as a result we now receive $30 million annually.

 By the end of 2014, we expect to receive about $166 million in distributions since the inception of the company. In addition to the distributions, there has been an 84% appreciation of our investment in the Partners, which as mentioned earlier is not fully reflected in our balance sheet.

 Please turn now to slide 26. Navios Holdings has over 46% economic interest in Navios Acquisition. Navios Acquisition has grown to become one of the top five publicly leased tanker owners among its US and European peers with one of the youngest in-the-water fleets. A few days ago, Navios Acquisition formed an MLP with [40 entities], providing a platform in the [world] sector for dividend-seeking investors and bringing flexibility and liquidity it to NMA.

 Moving to slide 27, Navios Midstream Partners went public in November and raised $121.5 million of gross proceeds. Post-IPO, NNA owns 57.5% of NAP. Through the IPO process, NNA sold four VLCCs to Navios Midstream for a consideration totaling $379.4 million.

 The vessels were sold at a 22% premium to their current fair market value and above their historical book value. The cash received from the IPO is being used in part to strengthen NNA's balance sheet.

 NNA repaid $132.3 million in bank debt from the cash proceeds, thereby deleveraging by 11%. In addition, from the cash received at the IPO, NNA also acquired the 2010 Japanese-built VLCC vessel for a purchase price of $75.5 million.

 Turning to slide 28, NNA's fleet has grown since 2011, and this will continue to grow as newbuild vessels deliver into the fleet next year. Available days have grown from just over 12,000 in 2011 to almost 13,500 in 2014, with further growth in 2015 when all vessels deliver into the fleet.

 As a result, EBITDA has grown by 67% between 2011 and 2013, and by 28% in the first 9 months of 2014 compared to the same period last year. In the current rate environment, we expect that EBITDA will continue to grow as NNA takes delivery of new vessels.

 Please turn to slide 29. Navios Acquisition provides significant cash flow to Navios Holdings. Including the expected dividends in 2014, Navios Acquisition has provided about $35 million in distributions since the start of operations. The value of Holdings' interest in Navios Acquisition has also grown over the past three years by more than 4%.

 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 Maritime Holdings Inc. - SVP Strategic Planning   [5]
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 Thank you, George. Navios Logistics has three segments: port terminals, barges, and cabotage and is one of the major logistics providers in the Hidrovia region of South America.

 Please turn to slide 31. The development of the new iron ore terminal to service our 20-year agreement with Vale International for the storage and transshipment of iron ore is progressing. We are developing the engineering design of the new terminal and selecting and procuring equipment.

 In parallel, we are advancing the remaining regulatory processes to start construction. I would like to remind you that we expect to invest approximately $150 million in this project and expect a minimum annual EBITDA of $35 million.

 In September 2014, we acquired a bunkering vessel for $4.9 million, including estimated repositioning costs. The vessel, which will serve our cabotage business, will be employed under a three-year time charter-out contract and we expect it will generate approximately $2 million annual EBITDA.

 Please turn to the next slide. In the past four years EBITDA has been growing at a 20.5% CAGR; and in the nine months of 2014 the growth rate has accelerated to 25.8%. From the three new contracts that we started servicing during Q2 2014, we expect to generate about $10 million annualized EBITDA. We expect similar contribution from another three convoys that remain to be deployed, as well as incremental growth from the investment in our port terminal infrastructure.

 Please turn to slide 33 to discuss the results for the third quarter and the nine-month period of 2014. EBITDA and net income for the nine-month period ended September 30, 2014, were affected by a $27.3 million write-off of deferred finance cost and fees related to the refinancing in April of the $290 million senior notes that were due in 2019. That amount was recorded in the second quarter and affects the results for the nine-month period.

 In order to make the comparison to the previous period meaningful, we have adjusted EBITDA and net income accordingly. There is no adjustment in the third-quarter figures.

 EBITDA for the third quarter increased by 67% compared to the same period last year, to $18.1 million. Port segment EBITDA increased by 6% to $8.8 million, mainly due to the increasing throughput in our dry terminal in Uruguay that moved 1.3 million tons of cargo in the quarter, 25% more than in Q3 2015.

 Please note that the increase in port segment revenue to $32.5 million from $12.3 million in the same period last year is mainly attributed to $19.4 million higher sales of fuel in our liquids port in Paraguay. This is an opportunistic, low-margin trading activity with relatively small but positive EBITDA contribution.

 Barge segment EBITDA increased by about 4.5 times to $5.3 million compared to $1.3 million in the same period last year, benefiting from the commencement of service of three new convoys under long-term time charter-out contracts and improved performance in our liquid cargo transportation. Cabotage business had a strong quarter, with EBITDA growing almost 3 times to $3.7 million compared to $1.3 million last year due to more operating days and higher charter rates. In the third quarter of 2014, net income was $3.1 million compared to net loss of $1 million in Q3 2013 for the reasons discussed above.

 Turning to the financial results for the nine-month period, adjusted EBITDA decreased 26% to $53.5 million on the back of strong growth in the barge and cabotage segments and stable performance in the port terminals. The increase in EBITDA was offset by an increase in depreciation and amortization, an increase in interest and finance expenses, and an increasing income tax to $0.8 million expense compared to an income tax benefit of $5.2 million in the nine months of 2013. As a result, adjusted net income for the period was $8.7 million compared to $9.4 million last year.

 Please turn to slide 34. Navios Logistics had a strong balance sheet. Cash at the end of the third quarter was $102 million compared to $86.6 million at the end of 2013. Net debt to book capitalization was 42% compared to 36% at the end of 2013 due to the $375 million of senior notes due in 2022 that were issued in April.

 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. This completes our formal presentation and we will open the call to questions.

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Questions and Answers
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Operator   [1]
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 (Operator Instructions) Ben Nolan, Stifel.

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 Ben Nolan,  Stifel Nicolaus - Analyst   [2]
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 Yes, thanks a lot. I have a few questions. Firstly, as it relates to the newbuilding that you -- or sorry, the new Capesize vessel that you guys -- secondhand vessel that you recently acquired. With respect to that vessel and really any other vessels that you might consider buying in the near term, how should we think of how you would choose to finance those?

 Obviously you have the cash on the balance sheet to pay for it outright. But should we be thinking of those'd potentially be rolling into the bond, or separate bank finance, or just carrying them unlevered?

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 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman, CEO   [3]
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 Actually, we will not roll into the bond. We are looking mostly to be done either with cash on our balance sheet or bank financing that is more flexible and you can prepay with the cash generation of the Company later. So you have no prepayment.

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 Ben Nolan,  Stifel Nicolaus - Analyst   [4]
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 Okay. Should we be thinking 50% of the purchase price, or what type of financing do you think is available to you guys at the moment?

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 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman, CEO   [5]
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 We can borrow higher. We don't borrow more than 60%, but somewhere between 50% and 60%.

 And if you have seen, this is an attractive financing. We did it at LIBOR 300 basis points with 19-year age-adjusted amortization profile, which is an attractive kind of financing.

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 Ben Nolan,  Stifel Nicolaus - Analyst   [6]
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 Yes, I would agree; that's pretty good.

 Then with respect to the larger drybulk shipping industry, obviously there has been a lot of discussion about the potential for a lot of the Chinese mines that have higher-cost iron ore production closing down as a function of lower prices of ore moving out of Australia and Brazil and a few other places. But I was wondering if anecdotally you guys have seen any mine closures on any material level as of yet out of China?

 Is that thesis actually beginning to take place now that ore prices are as low as they are? Or is it still somewhat theoretical, do you think?

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 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman, CEO   [7]
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 This is a -- when you have adjustment of commodities this takes some time to really sink in and seeing the closures. I think that as a -- this is the one thing. We show that the important iron ore has accelerated to about 16% imports; and we have seen that (inaudible) the domestic production it has been a 7% increase.

 So you have seen an acceleration on imported. And as they are going to close for the season, for the holidays, for their New Year, you will have to see what of the mines open up.

 The readjustment of this kind of closures takes times. It has to [set] in a price. It is not -- closures take much longer; you need six months and a year to see whether price has -- to see if this makes more sense.

 So even if you hear on the drybulk what happened with the commodity prices coming down, it took some time until rates resumed. These kind of things take a little bit of a longer time.

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 Ben Nolan,  Stifel Nicolaus - Analyst   [8]
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 Okay. Then lastly, and I know this is a little small thing, but with respect to the vessel that you guys acquired for the cabotage trade on the South American business, you are paying less than $5 million for what you are getting, $2 million of annual contracted EBITDA. That is a pretty nice ratio.

 How replicable is that? Is this just sort of a one-off unique situation, or is that something --? Albeit small, if you could do it a number of times, it is an awfully good rate of return. Is that at all possible to do again?

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 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman, CEO   [9]
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 Actually, there is good opportunities on the cabotage business, and it produces good results. The thing is that we like to keep a ratio between both cabotage business and the barges. So in essence you can actually, on a matter of results, for these very good results, we keep a ratio between the three businesses.

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 Ben Nolan,  Stifel Nicolaus - Analyst   [10]
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 Okay, but it is something that you could do again, you believe? That's fair?

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 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman, CEO   [11]
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 Yes, yes.

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 Ben Nolan,  Stifel Nicolaus - Analyst   [12]
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 Okay. All right. Well, that does it for my questions. Thanks a lot.

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 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman, CEO   [13]
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 Thank you.

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Operator   [14]
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 At this time there are no further questions, I will now return the call to Angeliki Frangou for any additional or closing remarks.

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 Angeliki Frangou,  Navios Maritime Holdings Inc. - Chairman, CEO   [15]
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 Thank you for listening to our results.

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Operator   [16]
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 Thank you for participating in today's conference call. You may now disconnect.




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