Q2 2017 Navios Maritime Holdings Inc Earnings Call
Aug 22, 2017 AM EDT
NM - Navios Maritime Holdings Inc
Q2 2017 Navios Maritime Holdings Inc Earnings Call
Aug 22, 2017 / 12:30PM GMT
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Corporate Participants
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* Angeliki N. Frangou
Navios Maritime Holdings Inc. - Chairman & 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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* 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 Second Quarter and First Half 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'll turn the call over to Navios Holdings Chairman and CEO, Angeliki Frangou. Angeliki?
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Angeliki N. Frangou, Navios Maritime Holdings Inc. - Chairman & CEO [2]
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Thank you, Lauren, and good morning to all of you who joined us on today's call.
Please turn to Slide 3, where we provide our company highlights. Navios Holdings controls directly 64 modern dry bulk vessels and manages almost 200 vessels in its broader fleet. Fleet size creates efficiency and purchasing power. It also allow us to develop operating leverage through proprietary processes and technical competency. As an example, our operating cost are estimated to almost 40% below the average of our listed peers.
Slides 4 and 5 illustrate our diversified universe of companies. Navios is a global brand with significant scale and deeply rooted in these relationships. 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 has a strong balance sheet and healthy cash flow. To date, the share price of Navios Holdings is about the market price of its stakes in its public subsidiaries, but over time, we believe that the intrinsic value of this company will be realized.
We have 2 things of note to report this quarter. First, we wanted to provide an update on the status of the iron ore transshipment facility built by our South American operations. During the second quarter, Vale commenced using the terminal. Vale unloaded approximately 33,000 metric tons of iron ore to create the bed for the stockpile area and subsequently transshipped about 41,000 metric tons of iron ore. This generated approximately $0.8 million of revenue. Vale has since been building a stockpile of about 150,000 metric tons of ore. We're expecting transshipments to continue ad hoc in Q3. Beginning October 2017, Vale's minimum transshipment obligation under the take-or-pay agreement commences. As a result, we can reasonably expect revenue of about $10.3 million for the fourth quarter of this year.
Second, the dry bulk market has improved and continues to improve on a daily basis. As you can see on Slide 6, the BDI has recovered 330% from the 2016 historical low. More importantly, the BDI fully must appreciate above 83% for it to reach the 20-year average. We have observed period-chartered increasing materially. It gives us recent results with -- for 21,000 for 1 year. Navios Holdings has 3 Capesize vessels opening in September.
Slide 7 details a favorable positioning. Our balance sheet is strong. We held $134.7 million in cash at the end of the second quarter. We also have no committed growth CapEx and no significant debt maturities until 2019. We diligently focus on cost management while maintaining scale so that we can enjoy industry-leading operating efficiencies. We control what we can through our essential management services whereby commercial management is done at cost and includes all sale and purchase transactions, charter transactions, financial transactions with no additional fee. We use a similar approach for technical management and administrative services. With our efforts, we decreased our G&A expenses by 52% over the past 2 years based on a run rate G&A expense for the first half of 2017. Also in 2016, we created almost $40 million in estimated operating cost savings when compared to the listed peers.
We recently sold 2 Handymax vessels for $11.8 million in net proceeds. These vessels were part of the collateral package of our secured notes and they will trade with a 2006-built Panamax vessel, which was added to the collateral package of the notes. As I stated previously, we created Navios Maritime Containers Inc. to focus on opportunities within the container sector. Navios Containers raised $50.3 million of gross proceeds through a private placement offering on the Oslo OTC market and used these proceeds along with debt financing to acquire a 14-container vessel fleet. These vessels have a stock value of approximately $90 million, which equates to approximately 76% of the acquisition price.
Additionally, the vessels have $45 million of contracted EBITDA and $60 million of contracted revenue attached to them. As you can see, the history work characteristics were varied compared for Navios containers and these vessels should provide significant upside in the recovery market, and then owns about 10% of the equity. It has a warrant for an additional 1.7% of the equity.
Slide 8 shows our free cash flow upside. We can capture in the recovery market. For the remaining 6 months of 2017, we expect our fleet open days, including days with index linked charters and profit sharing would provide incremental revenue of almost $6.5 million for every $1,000 increase in market rates. Using the 20-year average rate, we would generate about $70 million in additional revenue for the remaining 6 months of 2017. This represents about $140 million in additional revenue on an annualized basis.
Slide 9 sets forth Navios cost structure for the second half of 2017. Our expected daily revenue is $11,795 per day. We fixed 43.3% of our available days at an average daily rate of $8,606 and revenue increases by $2,549 per day to reflect the expected impact of current market rates on our open and index days. To this in total was $11,155, we need to add the $640 daily positive effect of the M&A dividend, which brings us back to our daily revenue of $11,795 per day. As to the breakeven, our costs for 2017 is expected to be $10,998 per day.
Our cost includes all operating expenses, (inaudible) dry docking expense. Chartering expenses for our charter include G&A cash expenses as well as interest expense and capital repayment.
Slide 10 highlights our strong liquidity position. Net debt-to-book capitalization was 67.5%, only had cash of $134.7 million and $141.2 million in total liquidity. We have no committed shipping growth CapEx or any material debt maturities until 2019.
I would like now 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 11 presents our diversified dry bulk fleet, consisting of 64 dry bulk vessels totaling $6.6 million deadweight, split between Capesize, Panamax and Supermax 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 64 vessels on the water with an average age of 8.1 years. This is 8% younger than the industry average. Navios Group's total fleet of 181 vessels includes 47 tankers, 33 container vessels and 101 dry bulkers and is one of the most diversified public shipping groups.
Slide 12 shows about $40 million of estimated operating cost savings of Navios Holdings in 2016. To measure our efficiencies, we compared our operating costs to the published results of our peers. We computed our peers' operating costs by reviewing their 20-Fs and related disclosures. As you can see on Slide 12, our analysis showed that Navios Holdings operating costs were estimated at approximately 40% lower than the average of the listed peers. These efficiencies translate in the savings of about $40 million in 2016. We believe that these savings demonstrate the substantial competitive benefit we can generate and the value it delivers to all our stakeholders, and we believe that computing our efficiencies based on actual operating results is the most persuasive way to demonstrate actual savings.
Turning to Slide 14. Global economic prospects worldwide are improving according to the IMF. World GDP forecast for 2017 and 2018 are 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 of 4.6% in 2017 and 4.8% in 2018. Growth in advanced economies such as Europe, Japan and the U.S.A. also seems to be accelerating as industrial production turns positive. 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 forecasted to grow by 3.4%.
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 supporting -- 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 16% June year-to-date.
Our current BDI levels to drive our market is about 330% above the all-time low of 290% in February 2016 with substantial upside, as it still remains 45% below the 20-year average. The recovery in dry bulk rates continues. The BDI average in the first half of 2017 was double the average in the first half of 2016.
Slide 15 shows demand for iron ore. Global iron ore seaborne trade is expected to rise by 77 million metric tons or 5.5% 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. Steel production in China continues to remain very 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 the seaborne iron ore shipments.
In 2016, imports of iron ore into China exceeded 1 million tons for the first time. 2017 imports is forecast to increase by another 7.3% or 73 million metric tons. Year-to-date, we see Chinese iron ore imports up an impressive 9%.
Of note, the Brazilian exports, which are forecast to grow by over 20 million tons in 2017, which will further boost the ton miles. The main increases in Brazilian shipments are expected to occur in the second half of 2017, which should provide a basis for improving charter rates.
Please turn to Slide 16. 2016 saw the Chinese coal markets start to restructure. Domestic coal production reduced by about 9% or approximately 300 million tons and imports of coal surged by 20% or about 40 million tons. The Chinese government continues to rationalize domestic coal production, closing down small inefficient mines in recurring consolidation of larger mining groups. It is expected that the restructuring of the Chinese coal industry will continue to encourage imports as inefficient, unsafe, polluting mines are closed.
Electricity consumption in China continues to rise in 2017 by about 7.5%, up to end July. Chinese thermal power generation rose by 8.2% to the end of July. With hydro production having issues with low rainfall, the demand for coal continues to rise, encouraging both increase in domestic production and an increase in imports. Through June 2017, coal imports are up by about 16%; that trend is likely to continue.
China reports less than 10% of its annual coal consumption but with the domestic coal price delivered to Guangzhou about $12 a ton above import prices, the market continues to incentivize imports.
Turning to Slide 17, agriculture production worldwide continues to increase. 2016 saw an increase in world trade of 21 million tons to 481 million tons. In 2017, forecasts are for a further increase of 5.1% or 24 million tons. Worldwide grain trade has grown by 5.3% CAGR since 2008, mainly driven by Asia. Demand increases are focused on Asian economies and especially China where incomes are rising. These areas tend to be further afield for major agricultural product exporters, helping ton miles which have grown by over 6% CAGR since 2009.
Grain is an inefficient cargo, loading delays due to complicated logistics and weather issues make total voyage days increase, absorbing ship capacity. The main export countries for grain tend to be Atlantic-based and the main import regions are Pacific-based. This also contributes to longer haul routes and increased ton miles.
High grain demand particularly helps the Panamax and Supermaxes during Q3 and into Q4, the grain harvest in the northern hemisphere will continue to fuel increases in seaborne shipments.
Moving to Slide 18. Up to the end of July 2017, 30.3 million deadweight of new built vessels delivered versus an expected delivery of 45.8 million tons, maintaining a high pace of nondeliveries at 34%. As of January 1, the 2017 order book stood at 58.1 million deadweight, using a 35% nondelivery rate for the year, it is estimated about 38 million tons will actually deliver. With about 10.1 million tons scrap so far in 2017, net fleet growth will continue to be low. With little incentive toward the new buildings and a 15-year low in the order book at 7.5% of the fleet, dry bulk fundamentals going forward should continue to improve.
Turning to Slide 19. 2016 ended a net fleet growth of 2.2%, the lowest percent in many years. Through July 2017, the pace of scrapping has fallen as charter rates have improved. However, 10.1 million tons of scrap year-to-date, maintaining the current scrap and pace of nondeliveries will produce a lower net fleet growth this year. There is an increasing pool of potential scrap candidates with bulkers 20 years or over representing about 7.3% of the total fleet. With new regulations regarding ballast water treatment systems and sulfur emissions restrictions coming into force, older ships will continue to scrap. We note that the current average Capesize Panamax scrap pricing Bangladesh of $415 per lightweight ton is 46% higher than at the same time last year, which should encourage demolitions.
Scrapping from further increase from the deactivation of some of the converted VLOC vessels. There are currently 50 of these vessels over 20 years of age. However, only 47 are actually trading, with 3 currently in layup in Malaysia. These vessels are facing increased hurdles to continue trading, and we believe will be phased out over the next few years. With dry bulk demand continuing to accelerate and outpace net fleet growth, the market fundamentals look set to improve.
I would now like to turn the call over to our CFO, George Achniotis for the Q2 financial results.
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George Achniotis, Navios Maritime Holdings Inc. - CFO [4]
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Thank you, Tom. Please turn to Slide 20 for a review of the Navios Holdings financial highlights for the second quarter and first half of 2017.
Adjusted EBITDA for the quarter was $31.3 million compared to $31 million in 2016. EBITDA and net income for the quarter were adjusted to exclude $5.1 million book loss from the sale of the Navios Horizon and $4.7 million allocated loss due to the impairment of NNA's investment in NAP. EBITDA was positively affected by a 12% increase in revenues, mainly due to an increase in bulk available days on the fleet and the time charter equivalent rate achieved in the period.
EBITDA was negatively affected by a reduction in equity net earnings of affiliated companies mainly due to the weaker results of NNA. Adjusted EBITDA for the first half of 2017 was $48.9 million compared to $61.6 million in the first half of '16. In addition to the items that affected the Q2 EBITDA, the first half results were adjusted to exclude a $9.1 million book loss relating to the sale of the Navios Ionian. EBITDA net income for the first half of '16 were also adjusted to exclude $14.9 million compensation received for the early redelivery of a claimer vessel from its charterer.
The more revealing comparison is between Q1 and Q2 2017 in revenue and EBITDA. Overall, revenue increased by $23.3 million of which $7.7 million is due to an increase in shipping revenue and $15.6 million from logistics. EBITDA for the 2 quarters increased by $15.8 million, $7.3 million due to its shipping and $6.5 million due to logistics. If we strip out from the shipping EBITDA the effect of the earnings from our affiliates, it's almost a dollar for dollar increase between revenue EBITDA and our shipping business. As the dry bulk market continues to improve, we expect a significant increase in the profitability of our business.
During the quarter, we recorded an adjusted net loss of $27.4 million compared to a net loss of $26.4 million in '16. This small reduction is mainly due to an increase in interest expense. Adjusted net loss for the first half of '17 grew $67 million compared to a net loss of $56 million in '16. The reduction was mainly due to the reduction in EBITDA.
Moving to Slide 21 in our balance sheet highlights. At June 30, 2017, we had about $135 million in cash compared to $141 million at December 31, 2016. The balance does not include $6.5 million net proceeds from the sale of the Navios Horizon, which was delivered in Q3. The reduction is mainly due to their completion of the construction of port in Uruguay. This is also reflected in the increase in fixed assets and the decrease for deposits for vessels, terminals and other fixed assets. Net debt to book capitalization at the end of Q2 was 67.5% compared to 64.8% at the end of last year. The ratio is expected to decline following the completion of the port in Uruguay and the EBITDA generation from the 20-year contract with Vale. Over the next few slides, we will break through the U.S. subsidiaries.
Please turn to Slide 22. Navios Holdings owns about 21% of Navios Partners, including a 2% GP interest. Navios Partners owns a fleet of 37 vessels, 30 dry bulk and 7 containers. NMM also owns about 60% of Navios containers, a growth vehicle dedicated to containers.
NMM's unique platform expected to generate significant cash flow with no significant near-term maturities. The company is currently in the process of renewing its dry bulk fleet with younger and larger vessels. So far this year, we started with 7 vessels with an average age of 7.4 years and has sold one 17-year-old vessel. Through this process, the dry bulk fleet size has increased by 33% or 1 million deadweight tons.
Turning to Slide 23. Navios Holdings owns about 46% of Navios Acquisition. Navios Acquisition has grown to become a leading tanker company with 36 modern high-quality vessels with an average age of 6.5 years, diversified between crude, product and chemical tankers. All vessels are on the water, generating cash flow and provide cash flow visibility as the fleet is 94% fixed for 2017. The strategy of the company continues to provide charters that outperformed the market. In fact, for the first half of 2017, the charter rates received has 51% higher than the spot market average, translating into $39 million of additional revenue when compared to the market average.
NNA is also the sponsor of Navios Midstream Partners, an MLP with 6 VLCCs, providing a platform in the wet sector for dividend-seeking investors and bringing flexibility and liquidity to NNA. NNA expects to receive about $21.3 million in distributions from Navios Midstream in 2017. It has received almost $50 million distributions from Navios Midstream since 2015.
Now I will turn the call over to Ioannis Karyotis for his review of the Navios South America logistics results.
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Ioannis Karyotis, Navios Maritime Holdings Inc. - SVP of Strategic Planning [5]
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Thank you, George. Slide 24 provides an overview of the Navios Logistics business. Navios Logistics operates 3 port terminals: one for grain, one for iron ore and one for liquid cargoes. Navios Logistics complements its ports business with its barge fleet for liquid transportation and product tanker fleet for coastal coverage of strait.
Please turn to Slide 25. The new iron ore terminal is transformational for Navios Logistics. We're excited to see operations now underway, and iron ore moving through the conveyor belt and loaded on to ships for export. During the second quarter, Vale commenced using the iron ore terminal, generating revenue of about $0.8 million in the quarter. Vale has since been building their stockpile and we expect our shipments to continue ad hoc in the third quarter. Beginning in October, Vale's minimum transshipment of engagement under the take-or-pay agreement commences. As a result, we expect revenue of about $10.3 million for the fourth quarter of this year from the Vale port contract. Based on 4 million tons annual throughput, we expect to generate $35 million EBITDA per year. Vale also has an option to transship 2 million tons per year in addition to the minimum guaranteed quantity, which would provide an incremental expected EBITDA of another $15 million. If the terminal operated at its 10 million tons design capacity annually, then the total expected EBITDA of the terminal would reach $85 million. The graph on the left shows the significant effect of the new terminal on Navios Logistics' consolidated annual EBITDA.
In addition, the contract includes annual tariff adjustment clauses with escalators such that it is reasonable to expect approximately $1.2 billion of cumulative EBITDA over the 20-year contract period. This is presented on the graph on the right.
Please turn to Slide 26. The Corumba regions mines produced iron ore of exceptional quality. According to Wood Mackenzie, the lump ore produced in the region commands a price premium of approximately $25 per ton to the 62% Sinter Fines benchmark. The Corumba mines output is expected to rebound to approximately 5 million tons per annum in the short term, with the potential to increase up to 13 million to 14 million tons per annum by 2025. We believe that our newly built terminal will be the most efficient port to service export volumes from the region.
Slide 27 reviews our results. Q2 2017 revenue increased 1% to $59.4 million and EBITDA decreased 7% to $19.3 million. Q2 2017 port segment revenue was 41% higher compared to the same period last year and EBITDA increased 29% to $10 million. The EBITDA increase is mainly attributable to the better performance of the grain terminal.
In the barge segment, Q2 revenue decreased 16% and EBITDA decreased 34% to $6 million. The decrease is mainly attributable to the expiration of certain long-term iron ore transportation contracts during the second half of 2016. Cabotage business Q2 EBITDA was $3.3 million compared to $3.9 million in the same period last year, mainly due to lower fleet utilization. Net income in Q2 2017 was $4.4 million compared to $7.4 million net income in the same period last year, mainly due to the decrease in EBITDA, high depreciation and amortization, interest expense net and lower income tax benefit.
Turning to the financial results for the 6 month period ending June 30, 2017. Revenue decreased 9% to $103.2 million. EBITDA decreased 12% to $29.3 million, and net income amounted $1.4 million from $15 million in the same period last year, mainly due to the decrease in EBITDA.
Please turn to Slide 28. Navios Logistics had a strong balance sheet. Cash at the end of Q2 2017 was $62.9 million compared to $68.1 million at the end of 2016. The increase in debt reflects the $14 million bank loan that financed the $11.2 million acquisition we made of 2 product tankers previously under capital lease and the extinguishment of the $16.5 million capital lease obligation. Net debt to book capitalization remained at 48%, unchanged compared to the 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 & CEO [6]
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Thank you, Ioannis. This concludes our formal presentation. We open the call to questions.
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Questions and Answers
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Operator [1]
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(Operator Instructions) Your first question comes from the line of Noah Parquette of JPMorgan.
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Noah Robert Parquette, JP Morgan Chase & Co, Research Division - Senior US Equity Research Analyst [2]
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I just wanted to start on the iron ore for a sec. So you talked a little bit about the capacity that you still have remaining. Can you give some -- a little more color on where you are in that process, the discussions and perhaps what kind of timing we can expect on that?
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Angeliki N. Frangou, Navios Maritime Holdings Inc. - Chairman & CEO [3]
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As you know, the port is -- and as you know, the port is [big] for 10 million. The new guarantee's 4 million for Vale, and that can go up to 6 million. So the additional 4 million capacity was -- we're looking into -- there is a port, mine up-river that we are discussing. We are in the process of -- our first priority has been to establish the operation of the port, make sure that we have a smooth loading of the vessels as well as unloading, processing (inaudible) in the different operations. So we are in the process. It takes time. Structuring group contract. That mine has a capacity of doing another 2 million tons. And we have also done a very thorough survey by an independent company on the different mines in the Corumba. Their levels of -- their ability, meaning at what level of iron ore price they will be comfortable to transship. Because the quality of the Corumba iron ore is at a higher level and that commands a higher price. So we've done a lot of analysis on that and we have spent the time in order to approach all our clients and see how we can maximize the full value of the 10 million.
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Noah Robert Parquette, JP Morgan Chase & Co, Research Division - Senior US Equity Research Analyst [4]
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Okay, great. That's really helpful. And then just broader, within the Corumba region, you had note the fall-off in iron production these past 2 years and the expectation that rebounds. Can you talk about why you expect that production to rebound? Is it simply a function of global iron ore price or something else going on?
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Angeliki N. Frangou, Navios Maritime Holdings Inc. - Chairman & CEO [5]
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Remember -- one of the most important things we have to realize is that for deliveries, for the transshipment port, which was honing iron ore basically (inaudible), the cost of bringing the iron ore down is more expensive. So today, with the port facility, we have significantly reduced the cost for transporting this iron ore. Secondly, you can create a stockpile down while the market delivers. And thirdly, the quality of this iron ore is of a much better quality, which makes it command a much higher price. So for -- even on today, it was about $27 additional. For end prices you have on the standard iron ore is another $30 because of its higher quality. Also, one consideration of quality (inaudible) and quality and pollution is taken into the equation, you realize that this iron ore makes far more sense.
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Noah Robert Parquette, JP Morgan Chase & Co, Research Division - Senior US Equity Research Analyst [6]
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Okay, that's great. And I think moving on to the barge business, we saw a nice little pickup there this quarter. What's going on there? Have you been able to put more charter contracts on your barge fleet? And will the improvement in port transshipments help the barge business in the future?
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Angeliki N. Frangou, Navios Maritime Holdings Inc. - Chairman & CEO [7]
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Yes. That is a key element that we have to realize. The barge business, yes, is weak. But as the iron ore starts, and we'll have the 4 million tons down the river, that will create the need for another 35 convoys. That absorbs quite a significant amount of the barge capacity existing. I mean, just to realize, Navios only has 4 today dedicated on iron ore. So overall, the transshipment ports will create a tightening of the conditions on the river. Just to take a few story-telling. I mean, the river used to be 8 million all and in last year it dropped to about 1.5 million, 2 million -- less than 2 million. So you realize that growth back up creates quite -- it absorbs capacity.
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Noah Robert Parquette, JP Morgan Chase & Co, Research Division - Senior US Equity Research Analyst [8]
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Okay. That's really helpful. And then just one final question on cabotage. Again, nice rebound here. Can you talk a little bit about what was causing the low utilization the past 2 quarters and what happened this quarter that was different?
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George Achniotis, Navios Maritime Holdings Inc. - CFO [9]
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Q1 is a seasonally lower quarter. And as we explained in the first quarter, we also had a dry dock, and we've had (inaudible) because we had significant repairs in one of the vessels. So we have -- we didn't have these events this quarter, which improved the utilization quarter-on-quarter.
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Operator [10]
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Your next question comes from the line of Chris Wetherbee of Citigroup.
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Prashant Nair, Citigroup Inc, Research Division - Associate Director of India Equity Research [11]
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This is Prashant on for Chris. I wanted to pick up just to ask you about the barge business there. So just to get a sense of how much upside there could be as there's more volume capacity we take in as the port terminals ramp up. How should we think about the EBITDA upside? And then just as a reminder, the contract that expires in 2016. How much of the losses or how much capacity did that contract take up in 2015 that freed up this year, just so we can get a rough sense of what the map would look like?
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Angeliki N. Frangou, Navios Maritime Holdings Inc. - Chairman & CEO [12]
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I will let Ioannis go through the details but I want to go first on the growth business. The barge business in 2017 was a minimum guarantee of a fourth week, inevitably grows high because we have a charter condition. The other macro view that I'd like to give you a view is that port has become a more prominent part of our business and then more substantial. If you pro forma the minimum guarantee of $35 million EBITDA of Vale, we will have of the let's say of the $95 million, we will have about $65 million same ports so that barge and the cabotage especially will be a much smaller percentage of our overall business. Definitely, (inaudible) that Navios [doesn't make] the Logistics, it will be almost 2/3 port.
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Ioannis Karyotis, Navios Maritime Holdings Inc. - SVP of Strategic Planning [13]
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Okay. Regarding the convoys that the -- were under long-term iron ore contracts. We have 9 convoys that were under long-term iron ore contracts as that expires in 2016 and we have another port that will continue until 2020.
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Prashant Nair, Citigroup Inc, Research Division - Associate Director of India Equity Research [14]
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Falls to 2020. Okay, that's really helpful. And then understanding that the EBITDA generation from cabotage is going to be a smaller percentage as you ramp up with the port percentage in [itself]. I just wanted to ask one small question in this regard. You're getting a refining, a river tanker in the first half. Just wanted to talk about -- a little bit about the energy business. I mean, you've talked about iron ore and grain movements in South America, but are there any -- is there any sort of headwind that's -- (inaudible) to get some color action just on the refining, refined product environment and whether or not you're seeing some sort of a pickup in the movement of those product that should help the cabotage business a bit in the back half or into 2018?
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Angeliki N. Frangou, Navios Maritime Holdings Inc. - Chairman & CEO [15]
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As you know, as work in our port has developed about a little bit more than half of our land, we can easily add -- we see a potential. And you have seen our Argentina house developing and overall, the regional system is important. And obviously, that (inaudible) can become an area where we can expand our ports facility. And we have sufficient land. We have a little bit less than half of the land developed (inaudible), and we can also use (inaudible) you have sufficient evidence that you can use. So that is an area we're looking. And we think there will be potential for further growth on that port segment.
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Operator [16]
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I'll now turn the call to Mrs. Angeliki Frangou for any final remarks.
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Angeliki N. Frangou, Navios Maritime Holdings Inc. - Chairman & CEO [17]
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Thank you. This completes our Q2 results.
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Operator [18]
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Thank you for participating in today's conference call. You may now disconnect.
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