Navios Maritime Holdings Inc Earnings Call

May 24, 2017 AM EDT
Thomson Reuters StreetEvents Event Transcript
E D I T E D   V E R S I O N

NM - Navios Maritime Holdings Inc
Navios Maritime Holdings Inc Earnings Call
May 24, 2017 / 12:30PM GMT 

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Corporate Participants
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   *  Angeliki N. Frangou
      Navios Maritime Holdings Inc. - Chairman and CEO
   *  George Achniotis
      Navios Maritime Holdings Inc. - CFO
   *  Ioannis Karyotis
      Navios Maritime Holdings Inc. - SVP of Strategic Planning
   *  Thomas Beney
      Navios Maritime Holdings Inc. - SVP of Commercial Affairs - Navios Corporation

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Conference Call Participants
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   *  Herman Hildan
      Clarksons Platou Securities, Inc., Research Division - Research Analyst
   *  Noah Robert Parquette
      JP Morgan Chase & Co, Research Division - Senior US Equity Research Analyst
   *  Prashant Nair
      Citigroup Inc, Research Division - Associate Director of India Equity Research

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Presentation
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Operator   [1]
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 Thank you for joining us for Navios Maritime Holdings' First Quarter 2017 Earnings Conference Call. With us today from the company are Chairman and CEO, Angeliki Frangou; Chief Financial Officer, George Achniotis; SVP of Commercial Affairs, Tom Beney; And SVP of Strategic Planning, Ioannis Karyotis.

 As a reminder, 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'll see the webcast link in the middle of the page, and a copy of the presentation referenced in today's earnings conference call can also be found there.

 Now, I'll review 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 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 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 risks. Navios Holdings does not assume any obligation to update the information contained in this conference call.

 The agenda for today's conference call is as follows. We'll begin this morning's conference call with formal remarks from the management team, and after we'll open the call to take questions.

 Now I'd like to turn the call over to Navios Holdings' Chairman and CEO, Mrs. Angeliki Frangou. Angeliki?

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 Angeliki N. Frangou,  Navios Maritime Holdings Inc. - Chairman and CEO   [2]
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 Thank you, Laura, and good morning to all of you joining us on today's call.

 Please turn to Slide 3, where we provide our company's highlights. Navios Holdings controls directly 66 modern dry bulk vessels and manages almost 200 vessels in our broader fleet. Our fleet size and purchasing power creates efficiencies and cost savings opportunities. Our operating leverage, which includes proprietary processes and technical competency, allows our operating costs to be 40% below the average of our listed peers.

 Slides 4 and 5 illustrate our corporate structure and diversification. Navios Holdings' value derives from the dry bulk fleet it holds directly and its equity interest in other entities that own tankers, dry bulk and container vessels. Each of these entities have a strong balance sheet and a healthy cash flow. While the value of our ownerships in these entities may not be currently appreciated, we believe that the intrinsic value of these companies will be recognized over time. And in fact the share price of Navios Holdings today is less than the market price of its stakes in its public subsidiaries.

 Slide 6 details our recent developments. Our balance sheet is strong. We have $138.2 million in cash at the end of the first quarter. We also have no committed growth CapEx and no significant debt maturities until 2019. We generated a $1.7 million benefit from repaying a loan at a discount. Also we refinanced a Capesize vessel with the bank loan with favorable features that include a term of 4.25 years, interest at LIBOR plus 3%, and a 10-year amortization profile.

 We diligently focus on cost management and creating and maintaining scale, so that we enjoy industry-leading operating efficiencies. In a volatile industry, we control what we can. We do this through essential management services whereby commercial management is done at cost and includes all sales and purchase transaction, charter transaction, finance transaction with no additional fee. We use an identical approach for technical management and administrative services. With our efforts, we decreased our G&A expenses by 43% over the past 2 years based on a run rate G&A expense for the first quarter of 2017. Also in 2016, we created about $40 million estimated operating cost savings when compared to our listed peers.

 We recently sold 2 Handymax vessels for $11.8 million in net proceeds. These vessels were part of the collateral parties of our secured notes, the covenants of which require us to reinvest the proceeds within 365 days. We created Navios Maritime Containers Inc. to focus on opportunities within the container sector. Navios Containers raised $75 million of gross proceeds through a private placement offering that will be initially listed on the Oslo OTC market. Navios Containers will have the right of first refusal for all container vessel acquisitions. Navios Holdings invested $5 million in the private placement and will own about 7% of Navios Containers plus a warrant for an additional 1.7% of the company's equity.

 Finally, in a busy quarter, Navios Holdings executed an exclusivity agreement and term sheet to purchase a 100% of FSL Asset Management Pte. Ltd. at no less than a total of 51.1% (sic) [50.1%] of the FSL Trust. FSL Trust owns 22 vessels, which include 5 containers and 17 tankers. We wanted to put in perspective the recovering trend we have seen in the dry bulk market and the best way to see that would be through the lens of the Baltic Dry Bulk Index.

 As you can see on Slide 7, while the BDI recovered significantly from 2016 historical low, the BDI today is still 140% below its 20-year average.

 Slide 8 shows the free cash generation that we can capture in the market recovery. For the remaining 9 months of 2017, we expect our fleet open day including days with index-linked charters and profit sharing would provide incremental revenue of almost $12 million for every $1,000 increase in market rates. Using the 20-year average rate, we would generate about $110 million in additional revenue for the remaining 9 months of 2017. This represents about a $150 million in additional revenue on an annualized basis. I would also note that in such market recovery, we will enjoy significant asset appreciation. For instance, if values recover to 20-year averages, our physical assets, our vessels, would also appreciate over 50% from current values without including our ownership interest in Navios Logistics or interest in public subsidiaries.

 Slide 9 sets forth Navios' cost structure for the remaining 9 months of 2017. Our expected daily revenue is $11,918 as we fixed 33.1% of our available days at an average daily rate of $8,917 per day. In addition, revenue increases by $2,374 per day to reflect the expected impact of current market rates on our open/index days. This brings the daily revenue to $11,291. Finally, we need to include $625 (sic) [$627] daily effect of the NNA dividend, which bring us back to $11,918 per day. As to breakeven, our cost for 2017 is expected to be $10,990 per day. I remind you, as I do every quarter, that our breakeven analysis includes all operating expenses, scheduled drydocking expenses, charter-in expense for our charter-in fleet, G&A cash expense, as well as interest expense and capital repayments.

 Slide 10 shows our $40 million of estimated operating cost savings of NM in 2016. To judge our efficiencies, we compare our operating cost to the published results of our peers. We computed our peers' operating cost by reviewing their 20-Fs and related disclosures. As you can see on Slide 10, our analysis reveal that NM's operating costs were estimated at about 40% lower than the average of our listed peers. These efficiencies translate in savings of about $40 million in respect of 2016. We believe that these savings demonstrate the substantial competitive benefit we can generate and the value delivered to our stakeholders. And we believe that computing on efficiencies based on actual operating results is a most persuasive way to demonstrate actual savings.

 Slide 11 highlights our strong liquidity position. Net debt to book capitalization was 66.2%, and we had cash of $138.2 million and $158.2 million in total liquidity. We have no committed shipping growth CapEx or any material debt maturities until 2019.

 I would now like to turn the call over to Mr. Tom Beney, Navios Holdings' Senior Vice President of Commercial Affairs. Tom?

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 Thomas Beney,  Navios Maritime Holdings Inc. - SVP of Commercial Affairs - Navios Corporation   [3]
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 Thank you, Angeliki. Slide 12 presents our diversified dry bulk fleet, consisting of 66 dry bulk vessels totaling 6.7 million deadweight split between Capesize, Panamax and Supramax Handy. We continue to be one of the largest U.S. Listed dry bulk operators in the world established over 60 years ago. We have 66 vessels on the water with an average age of 8.1 years. This is 7% younger than the industry average. Navios Group's total fleet of 167 vessels includes 47 tankers, 19 container vessels and 101 dry bulkers, and is one of the most diversified public shipping groups.

 Turning to Slide 14. Global economic prospects worldwide seem to be improving. For the first time in 4 years, the IMF has increased its GDP forecast for the current year based on rising fundamentals worldwide. World GDP forecast for 2017 and 2018 of 3.5% and 3.6%, respectively, suggesting accelerated dry bulk demand. Emerging market growth, predominantly in the Asian region, is the major driver with GDP growth at 4.5% in 2017 and 4.8% in 2018. Growth in advanced economies such as Europe, Japan and the USA also seems to be accelerating as industrial production turns positive.

 The total dry bulk order book 2017 onwards is now only 7.7% of the total fleet, a 15-year low. Record scrapping for a combined 2-year period in 2015 and 2016 alongside record non-deliveries of the order book has kept net fleet growth minimal. Even with the seasonal downturn we experienced in Q1 2017, together with the seasonal upturn going into Q2, in general, the market is well supported. Consequently, charters are taking more vessels on time charter. For example, yesterday, charterers have taken 48 Capes and 36 Panamaxes for 1 year or more compared with 40 Capes and 35 Panamaxes taken during all of 2016.

 Please turn to Slide 15. Between 2014 and 2015 dry bulk trade remained flat, with 2016 showing an increase of about 1.3%. Dry bulk trade growth is set to accelerate in 2017 and is forecast to grow by 3.4% well above the 1.9% growth previously forecasted for 2017. The Chinese government has been conscientious in stimulating their economy and GDP growth. Chinese economic policy has been instrumental in supporting dry bulk trades. Increased loan initiations for housing and infrastructure supported the Chinese construction industry and steel demand.

 In January 2017, loan initiations from Chinese banks reached a new high further supporting fixed asset investments, which have increased by 10% March year-to-date. The Chinese authorities are also restructuring the domestic coal industry, keeping a window open for increased coal imports as electricity consumption increases. Improving incomes and increased share of protein in Asian diet supports the ever increasing imports of grain seen over the last few months and years. These key factors have helped turn the market back to a positive trend, which looks likely to continue going forward.

 Slide 16 shows demand for iron ore. Global iron ore seaborne trade is expected to rise by 76 million metric tons or 5.4% in 2017. Since 2007, global iron ore trade has grown by 12% CAGR. China accounts for about 70% of the world's seaborne iron ore imports. Imports of iron ore into China in 2016 exceeded 1 billion tons for the first time. Chinese domestic iron ore production rebounded in Q1 as iron ore prices spiked into the $90 a ton range. Despite this, year-to-date, we see Chinese iron ore imports up an impressive 12%. Forecasters have increased their estimates and are now showing an expected increase in Chinese imports of 7.3% in 2017, or 73 million tons. Some of the additional demand is expected to be covered by Brazilian exports further helping ton miles. The new Vale super mine S11D project helped increase Brazilian exports, which is forecast to grow by 23 million tons in 2017, about 3x the increase in 2016, increasing ton miles.

 Steel production in China continues to remain firm, up 5% year-to-date. Higher Chinese domestic demand for steel has been stimulated by large government-backed infrastructure projects and recovery in the Chinese housing market. Chinese steel exports have decreased to manage the growth in domestic demand. So steel production in the rest of the world has to increase to cater for the shortfall, further aiding seaborne iron ore shipments.

 Please turn to Slide 17. 2016 saw the Chinese coal markets start to restructure. Domestic coal production reduced by about 9%, or approximately 300 million metric tons, while imports of coal surged by 21%, or about 40 million metric tons. The Chinese government continues to rationalize domestic coal production closing down small inefficient mines and encouraging consolidation of large mining groups. Coal derived electricity production in China grew by 5.1% in 2016 and has grown by 7.6% through April this year, as economic activity picked up and hydro reduced by 4.2%. As a result, coal imports have increased by over 20% March year-to-date. It is expected that the restructuring of the Chinese coal industry and increase in thermal electricity production will continue to encourage imports as inefficient polluting mines are closed.

 Slide 18 shows another aspect of the dry bulk market that is coming into focus as China's economy continues to improve. As per capita incomes increase, the country will consume more protein. Chinese per capita meat consumption still lags the OECD by a considerable margin. Asian imports of soybeans and soybean meal, an important feedstock for animals, are forecast by the USDA to increase dramatically in the next 10 years.

 Chinese soybean imports increased by 10% CAGR between 2009 and 2016. Worldwide imports of soybean saw 10% CAGR over the same period, while total grain imports grew 5.8% CAGR. Forecasters predict another 4.8% expansion in seaborne grain trade for 2017. Grain is an inefficient cargo. Loading delays due to complicated logistics and weather issues make total days of voyage increase, absorbing ship capacity. The main export countries for grain tend to Atlantic based and the main import regions are Pacific based. This also contributes to longer haul routes and increased ton miles.

 Moving to Slide 19. As of January 1, 2017, the 2017 order book stood at 58.1 million deadweight. Up to the end of April, 2017, 20.4 million tons delivered versus an expected delivery of 34.6 million tons, maintaining a high pace of non-deliveries of 41%. Using a 40% non-delivery rate for 2017, it is estimated about 35 million deadweight will actually deliver. Annualized scrapping is currently running about 19 million metric tons. Therefore, for 2017, net fleet growth will continue to be low. With little incentive to order newbuildings over the last couple of years, the order book going forward is at a 15-year low, improving dry bulk fundamentals.

 Turning to Slide 20. The 2016 order book stood at 92.7 million deadweight on January 1, 2016, 47.2 million deadweight actually delivered. Scrapping in 2016 amounted to 30.1 million deadweight. The combination of low deliveries and high scrapping led to a low 2.2% net fleet growth in 2016. So far, scrapping year-to-date in 2017 is 7.3 million deadweight. With additional capital investments needed for third special surveys or beyond for older vessels and the recently ratified Ballast Water Management Convention scrapping can continue. The pool of scrap candidates, as illustrated on the right hand chart, continues to be sufficient to maintain a healthy scrap pace for 2017 and onwards. 7.6% of the total dry bulk fleet is 20 years or older.

 We would also like to note the ongoing investigation into the converted VLOC vessels. These are currently 52 of vessels over 20 years of age still trading. As a result of the tragic Stellar Daisy loss in March and the subsequent discovery of structural cracks in other VLOC conversions, accelerated scrapping or curtailment of the use of these ships over 20 years of age may be inevitable. With dry bulk demand continuing to accelerate and net fleet growth remaining low, the market fundamentals look set to improve.

 I would now like to turn the call over to our CFO, George Achniotis for the Q1 financial results.

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 George Achniotis,  Navios Maritime Holdings Inc. - CFO   [4]
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 Thank you, Tom, and good morning. Please turn to Slide 21 for the review of the financial highlights of the first quarter of 2017.

 Adjusted EBITDA for the quarter was $17.5 million compared to adjusted EBITDA of $30.6 million in Q1 of '16. EBITDA and net income for the quarter were adjusted to exclude the $9.1 million book loss relating to the sale of Navios Ionian, a 2000-built Handymax vessel. The vessel was sold for $5.3 million net and it is expected to be delivered in June. A second Handymax vessel, the Navios Horizon, built 2001, was sold in Q2 for $6.5 million net and it is expected to be delivered in August.

 EBITDA and net income for Q1 of '16 were also adjusted to exclude $14.9 million compensation received for the earlier delivery of the Kleimar vessel. Net income was also adjusted to exclude the write-off of an intangible liability due to the earlier delivery of the same vessel. The reduction in EBITDA is mainly due to a reduction in earnings of Navios Acquisition, due to a weaker Q1 2017 compared to '16 and a weak quarter in Navios South American Logistics, which Ioannis will discuss in more detail. The decrease was partly mitigated by increased earnings of the core fleet due to the improvement in the market. Adjusted net loss for the quarter was $39.6 million compared to a loss of $29.7 million in 2016.

 Please turn now to Slide 22, where the balance sheet highlights are presented. We continue to maintain a healthy cash balance. As of March, 31, 2017, the cash balance was about $138 million compared to $141 million at the end of December '16. Deposits for asset acquisitions have increased to $153 million compared to $137 million at December 31, as the construction of the port in Uruguay comes towards its completion.

 Over the next few slides, we will briefly review our affiliates. Please turn to Slide 23. Navios Holdings owns about 21% of Navios Partners, including a 2% GP interest. Navios Partners owns a fleet of 35 dry bulk and container vessels. Navios Partners is positioned to take advantage of a recovering market. During Q1, the company refinanced debt so that it has no maturities for over 3 years. Navios Partners also raised $100 million in equity and used these proceeds to acquire 5 dry bulk vessels, which are expected to provide reasonable [lever] returns. Finally, Navios Partners took advantage of a unique opportunity by raising $75 million for Navios Maritime Containers, a growth vehicle dedicated to containers. Navios Partners will benefit from any recovery in the container sector through its 40% equity in Navios Containers. Navios Holdings also has a 6.7% equity stake in Navios Containers.

 Turning to Slide 24. Navios Holdings owns just over 46% of Navios Acquisition. NNA has 36 high quality vessels, with an average age of 6.3 years, diversified between crude, product and chemical tankers. All vessels are generating cash flow as their fleet is over 90% fixed for 2017. NNA is also a sponsor of Navios Midstream Partners, which is expected to provide over $21 million in distributions in 2017. NNA reported $37.4 million of EBITDA, and $5.6 million of net income for Q1, 2017, or $0.04 per share. The strategy continues to provide charters that outperform the market. In fact, in Q1 2017, the company enjoyed charter rates that were 42% higher than the spot market average.

 And 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 of Strategic Planning   [5]
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 Thank you, George. Slide 25 provides an overview of the Navios Logistics business.

 I begin my remarks on Slide 26, which focuses on our recent developments. In March, we inaugurated our new iron ore terminal in Uruguay. We are expecting Vale's first convoy with iron ore to arrive at the terminal towards the end of May, and shipments to commence soon after. As of Q1 2017, we have paid or incurred approximately $142 million of expenses for the development of the new terminal, and we have capitalized about $9 million of interest during construction.

 In other recent developments, in May, we acquired the 2 tanker vessels we previously operated under capital leases. These leases obligated us to purchase the tankers in 2020. We paid $11.2 million, and as a result, we no longer need to pay the $16.5 million of remaining capital lease payments. We financed the acquisition with a new $14 million term loan and we'll use the $2.8 million excess loan proceeds for general corporate purposes.

 Slide 27 reviews our results. Q1 2017 revenue was $43.8 million and EBITDA was $10.1 million. Q1 2017 port segment revenue was 3% lower compared to the same period last year and EBITDA decreased 22% to $4.4 million. The decrease is mainly attributable to lower throughput in the dry terminal, which was affected by reduced transshipments of Paraguayan corn in the quarter. In the barge segment, Q1 revenue decreased 29%, and EBITDA decreased 52% to $5.6 million. The decrease is mainly attributable to the expiration of certain long term iron ore transportation contracts during the second half of 2016.

 As the first quarter is a seasonally low quarter for grains, we were not able to find full employment in that sector. The decrease was partially mitigated by $1 million gain from the sale of 2 self-propelled barges. Cabotage business Q1 EBITDA was $0.2 million compared to $4 million in the same period last year, mainly due to less available days due to dry docks and lower fleet utilization. Net loss in Q1 2017 was $3 million compared to $5.7 million net income in the same period last year, mainly due to the decrease in EBITDA that was partially compensated by lower depreciation, interest and tax expenses.

 Please turn to Slide 28. Navios Logistics has a strong balance sheet. Cash at the end of Q1 2017 was $69.7 million compared to $68.1 million at the end of 2016. Net debt to book capitalization was 48%, unchanged compared to year-end 2016.

 Now I would like to turn the call back to Angeliki.

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 Angeliki N. Frangou,  Navios Maritime Holdings Inc. - Chairman and CEO   [6]
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 Thank you, Ioannis. This completes 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) Your first question comes from the line of Noah Parquette with JPMorgan.

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 Noah Robert Parquette,  JP Morgan Chase & Co, Research Division - Senior US Equity Research Analyst   [2]
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 Just wanted to ask, there is a lot of potential at the terminal business for additional capacity. Where are you in that -- in those conversations? Where are you looking? And can you maybe give some color on how much additional capacity do you think you can tie up at the end of the year.

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 Angeliki N. Frangou,  Navios Maritime Holdings Inc. - Chairman and CEO   [3]
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 What we are looking is, as you know there's additional mines in the area, the mine that used to be operated by the MMX Group, which has now been renamed and is called Vetorial. This mine is operating and -- has started operating and if you see historical data, I mean you had about $2 million to $3 million throughput on the MMX -- previous MMX board. And this is a kind of a capacity that we can tie up. So what we are reviewing is the potential of creating an agreement where we start throughput, start a contract with this new entity. Our priority has been to be fully operational, which we already have done. And as you know, the first convoy of Vale is coming in May, creating the stockpile. And of course after providing the good service to our client is to expand on new business.

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 Noah Robert Parquette,  JP Morgan Chase & Co, Research Division - Senior US Equity Research Analyst   [4]
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 Okay. That's really helpful. I just want to ask again also about the 2019 note. That's coming up. You guys have a lot of different options to address that. Can you talk about what you're considering or maybe what your strategy is as you approach that?

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 Angeliki N. Frangou,  Navios Maritime Holdings Inc. - Chairman and CEO   [5]
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 I think one of the things that you have to see is that rates are moving irrelevant to the volatility. We see rates moving steadily up. And then, the average of Q1 versus what we have Q2 is over 20% among the sectors. So from [10,000 you have moved] quite significantly higher. And we have a -- number one, we have a strong cash generation and we have a lot of market exposure. We have 2/3 of our available days, over 11,500 days for the 9 months exposed to the export market.

 That generate -- if you go to 20-year average, which is just a calculator, every $1,000 generates $12 million additional free cash. So realizing and, I think, the reason we put this calculator in Page 8 is to really give you a magnitude of our cash generation. And we have seen that this is really happening. I mean, we see the rate recovering with the volatility. And we are still not even -- we still have a long way to go to a 20-year average. And you can see that it can generate about -- as a calculator, if you reach 20 year average we generate $110 million and $150 million annualized.

 In the same way, that cash flow generation increases, you see also asset values. As cash flow -- if cash flow generation increases, you'll see also that our asset values can move over 50% from where we are today, physical assets, the vessels. We have seen an improvement, I mean, from where the low of the market last year was. We have seen an improvement from that but it's an early part of recovery. You still have quite a significant upside from over 50% from where we are. So in essence you have a lot of levers, cash flow and asset values. In today's market, I mean you have a visible cash flow generation and also you have -- don't forget, take for example, bank loans. We have about 65% loan to value, you have plenty of equity value there.

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 Noah Robert Parquette,  JP Morgan Chase & Co, Research Division - Senior US Equity Research Analyst   [6]
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 Yes. And then I guess as you get closer maybe more of that EBITDA and the additional capacity of the term loan is kind of locked up. I mean, what are your plans for logistics? Will you monetize a portion of that, would you still consider going to the market and what timing?

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 Angeliki N. Frangou,  Navios Maritime Holdings Inc. - Chairman and CEO   [7]
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 I think the market for (inaudible) in the contracts with value-based transparency, you have 20-year contract with a committed EBITDA that provides you over $1 billion if you take it over the 20 years. So I don't know if the capital market is the right answer, because in essence maybe the market in South America and the perception of South America depends, but you definitely have a lot of -- you have a lot of entities and a lot of interest on a 20-year visible contract which can be monetized with a lot of other ways. We are not seeking something like that. We see that there is a lot of other ways, but there is a lot of transparency and clarity on this 20-year contract.

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Operator   [8]
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 The next question comes from the line of Chris Wetherbee with Citi.

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 Prashant Nair,  Citigroup Inc, Research Division - Associate Director of India Equity Research   [9]
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 This is Prashant on for Chris. I wanted to pick up on a point that you were talking about, Angeliki, about increasing asset values as the market starts to recover. I wanted to know how you think about balancing opportunistic asset sales in terms of managing liquidity, especially looking at some of maybe the older part of the fleet and some of the smaller vessels. I understand you want to maintain exposure as rates improve, but also there might be some opportunities. So I just wanted to get a sense of how you're thinking about that this year. I know there's some volatility to the upside, but any color you could provide would be helpful.

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 Angeliki N. Frangou,  Navios Maritime Holdings Inc. - Chairman and CEO   [10]
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 Listen, we are very open on this thing. You have seen that we already sold 2 older vessels. I mean we sold them at good -- very good values. I mean we got over 4x over $6 million on -- about $6 million on each vessel, that was 2000 and 2001. So we are there to replace assets and opportunistically see. Don't forget on the other side, we increased also market exposure, because last year in October we added about 2,800 days of charter-in vessels at very attractive charter-in rates at 6.5 for 2017 and 7.5 for 2018.

 So we are mindful where the market is and we are mindful how to take advantage of that, either with a sale and purchase or with exposure to the market. The other thing I'd like to remind you of is that the company is quite significantly exposed to the market upside, meaning you are only 30% fixed with 2/3 of your available days open. And if you look on 2018, again, you have about 18% fixed with a lot -- about 80% of your available days again open to the market on a upside. We have seen the market, we value the situation, we see that there is a lot of upside potential versus downside risk.

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 Prashant Nair,  Citigroup Inc, Research Division - Associate Director of India Equity Research   [11]
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 Okay. That's extremely helpful. And then just a couple of questions on logistics. In terms of the barge business, I understand that 1Q is seasonally weak, but it seems like between the barge and the cabotage, revenues have been sort of -- were up sequentially from 4Q slightly, but still down year-over-year. How should we think about the cadence of the revenues? Is this sort of like a run rate from which we should then assume regular seasonality, or do you expect some more strength as the new port facilities open up and maybe you start to see more grain exports as well coming out of South America? Just wanted to get a sense of how to think about the revenue generation there as we go through the year.

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 Angeliki N. Frangou,  Navios Maritime Holdings Inc. - Chairman and CEO   [12]
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 There is one thing that -- I would like Ioannis talk on the specifics, but just to give you a broad picture, let's see that delivery is not different than what has happened in the overall market. Navios model was greatly protected with a lot of contracts. But as you realize, as delivery had less flow of cargos, I mean iron ore -- mainly iron ore and some of the grain disruptions, depending on the values and rain seasons. If you -- there was less cargo coming down, and that has been an effect that followed in Q1.

 What we have seen is, Vale start moving again, we have the situation with a movement that they will start building up, taking a full effect from the second half. That will also affect overall their EBIT. What happened in the international market, in essence, has affected, volumes have affected also their EBIT.

 What we see is that there is a recovery coming and Navios model, which is protecting the downside, have diverse sources for barge and cabotage gives you an ability to lever all sizes. Let's not forget that this weakness may also provide opportunity. This is an environment that may provide you consolidation opportunities, they also provide you, I mean -- and also there is a good -- apart from the flow of the commodities that can be disrupted from last year, you know that this is coming and you also have a pro-business environment with Argentina. So overall there is a weakness on Q1, but we see that flow of cargo will increase and you have a good political environment in Argentina and overall will affect the market.

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 Prashant Nair,  Citigroup Inc, Research Division - Associate Director of India Equity Research   [13]
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 Okay. That's extremely helpful color. And just one final one, Angeliki you talked about the entity with whom you are in discussion for securing the 4 million tons of available capacity to third parties at (inaudible). Was there -- did you mention how much they might be able to -- they said they might be able to take of that available capacity, or is that something to be determined still?

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 Angeliki N. Frangou,  Navios Maritime Holdings Inc. - Chairman and CEO   [14]
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 There is -- you know we do not have the contract. If we have a contract, we will comment and define. But I mean if you take the historical production of that mine was over 2 million tons previously. So this I give you a circa number of what we have seen from the historical production of that mine.

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Operator   [15]
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 Your next question comes the line of Herman Hildan with Clarksons.

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 Herman Hildan,  Clarksons Platou Securities, Inc., Research Division - Research Analyst   [16]
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 My first question, obviously you established Navios Container during the quarter. I'm kind of just curious in terms of the group structure, is it possible to kind of give any color if you have any strategies long term? How you might see whether it's going towards increasing number of listed entities? So while we have a long term ambition of consolidating all the exposures in different pockets and kind of have a parent, is it possible to give any color on that?

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 Angeliki N. Frangou,  Navios Maritime Holdings Inc. - Chairman and CEO   [17]
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 Yes, and a good question. I mean we have seen that there is great opportunities on the container sector. We in -- at Navios, we have been seeing a sponsor in general. We have seen that there is a lot of deals from the banking sector from distressed deals and we like to capitalize. The RMT fleet was a first transaction, and as you've seen, we have already also signed an LOI with FSL. So what we have seen is that there is good volume of transactions. And creating a container -- a dedicated container company create -- a pure play makes sense, whereas the opportunity is largest also -- to derisk the overall group and create a dedicated pure play.

 As we will grow -- and we see that there is going to be opportunities to grow that Navios Container in OTC and then moving to a major exchange when we have the scale that we like and continue.

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 Herman Hildan,  Clarksons Platou Securities, Inc., Research Division - Research Analyst   [18]
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 And kind of just to follow up on the container focus. Obviously you've done the Rickmers deal, the FSL deal that you mentioned, how big is the opportunity space, call it, in the container sector to kind of replicate these kind of deals?

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 Angeliki N. Frangou,  Navios Maritime Holdings Inc. - Chairman and CEO   [19]
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 I think there is a lot of things to be done. This is a sector that went through -- is in recovery, but on a different recovery on the dry bulk. And you have a lot of -- I mean there is a lot of assets that we need to find a home, that they need to be moved away from the bank or entities that have not seen a healthy balance sheet need to be organized. I mean there is a devastation that happened on the container. You had a very [glick] moment last year and we have seen that that market is moving to a recovery but delayed versus the dry bulk.

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 Herman Hildan,  Clarksons Platou Securities, Inc., Research Division - Research Analyst   [20]
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 And obviously, if -- I mean, I guess there is some many similarities between dry bulk last year and container this year. I'm not sure if you're going to even answer this question. But if you had to choose a focus area, where do you think the best opportunities lies? Do you think that's in the container space or in the dry bulk space?

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 Angeliki N. Frangou,  Navios Maritime Holdings Inc. - Chairman and CEO   [21]
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 I mean, we can see opportunities in every sector but you can see that we thought that the opportunity was big enough in the container to create a separate company.

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 Herman Hildan,  Clarksons Platou Securities, Inc., Research Division - Research Analyst   [22]
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 Yes. And final question, also Navios Logistics obviously you've completed your large CapEx program in South America. And kind of what's your thinking on that cash flow going forward? Is that a potential separate listing? Is it new investment program? Or kind of how do you think about that the cash flow which obviously Navios is ramping up?

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 Angeliki N. Frangou,  Navios Maritime Holdings Inc. - Chairman and CEO   [23]
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 We are open. I mean what we see is that it makes a lot -- I mean we have a strong company, we have a good cash flows. We see the area is taking -- apart from the Navios, you have a lot of weakness in the area. And I think we can take an advantage of opportunities there and on consolidation. But we are very mindful of the diversity of our structure and our ability to really capture upside.

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Operator   [24]
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 We have reached our allotted time for questions and answers. I will now turn the call back to Angeliki Frangou for closing remarks.

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 Angeliki N. Frangou,  Navios Maritime Holdings Inc. - Chairman and CEO   [25]
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 Thank you. This completes our quarterly results.

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Operator   [26]
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 This concludes today's conference call. You may now disconnect.




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