Navios Maritime Holdings Inc.

Thank you for joining us for Navio's Maritime Partners First Quarter 2024 Earnings Conference Goal. With us today from the company are Chairwoman and CEO, Ms. Angeliki Fraungu, Chief Operating Officer, Mr. Stratos Vissipris, and Chief Financial Officer, Mrs. Erin Cironi, and Vice Chairman, Mr. Ted Petron. As a reminder, this conference call is being webcast. To access the webcast, please go to the Investors section of Navio's Partners website, -mlp.com. You'll see the webcasting link in the middle of the page, and a copy of the presentation referenced in today's earnings conference call will also be found there. Now I will 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 Navio's Partners. Forward-looking statements are statements that are not historic effects. Such forward-looking statements are based upon the current beliefs and expectations of Navio's Partners' management and are subject to risks and uncertainties which could cause actual results to differ materially from the forward-looking statements. Such risks are more fully discussed in Navio's Partners' filings with the Securities and Exchange Commission. The information set forth herein should be understood in light of such risks. Navio's Partners does not assume any obligation to update the information contained in this conference call. The agenda for today's call is as follows. First, Ms. Fanwu will offer opening remarks. Next, Mr. Recipis will give an overview of Navio's Partners' segment data. Next, Ms. Ciaroni will give an overview of Navio's Partners' financial results. Then Mr. Pedron will provide an industry overview. And lastly, we'll open the call to take questions. Now I turn the call over to Navio's Partners' chairwoman and CEO, Ms. Angeliki Fanwu. Angeliki?

Good morning to all of you join us on today's call. I am pleased with the results for the first quarter of 2024. For the quarter, we reported revenue of $318.6 million and net income of $73.4 million. Earnings per common unit was $2.38. The first quarter of 2024, regional conflict, particularly in the Middle East, continued to affect transportation. This can be seen in the material reduction in transit through the Red Sea and the Suez Canal. In addition, the US and European economies are managing inflationary pressures and are generally healthy, with Europe rebounding after a period of softness. As a result of these and other factors, this was Navio's Partners' strongest first quarter financial performance ever. We remain cautious as many of the factors driving this robust maritime environment can change quickly should conflict-briefening efficiencies clear and our economy suffer from a further wave of inflation. As usual, we continue to execute on our strategic initiatives by focusing on things that we can control, such as reducing leverage and modernizing our energy-efficient fleet. I would also note that we continue to take long-term cover where available, as rates are around or exceeding long-term averages. For example, we recently chartered out a Cape size vessel for 2.9 years, almost three years, at a net daily rate of $28,500. Please turn to slide seven. Navio's Partners is a leading publicly listed shipping company, diversified in 15 asset classes in three sectors. We have $318.4 million of cash in our balance sheet. For sales here today, we sold four vessels generating 92.6 million gross sale proceeds, of which 9.8 million of sales was completed in the first quarter of 2024. 82.8 million dollars of sales will be completed in the second quarter of 2024. For acquisitions here today, we spent 245.7 million acquiring six vessels. We acquired two new buildings, scrubber-fitted Afromax LR2 tankings, for $129.1 million. We also acquired four Japanese-built Kamsa Maxis, previously chartered in for $116.6 million. As for deliveries, we took delivery of three previously announced new building vessels with employment. Two are 5,300 NTU container ships fixed for an average rate of $37,050 net per day for 5.2 years, and one is an Afromax LR2 tanker fixed at 26,366 net per day for five years. We continue to add to our contract backlog. This quarter we added $211.2 million in contracted revenue. Our operating cash flow potential remains strong. For the last nine months, 2024, we estimate to have $53.3 million of contracted revenue in excess of cash costs while having 13,820 open or index days. Turn to slide eight. On the slide, we provide an overview of our execution in terms of selected metrics we feel are important. As you can see, our fleet remains the same size today as it was in year end 2022. With all of the purchases and sales effectively netted each other out. Not accidentally, our fleet age remains about the same. We maximize energy efficiency by maintaining a fleet of youth-reversed with the latest technology while we patiently await the development of more carbon-nutrient technologies. In addition, as you can see from the vessel value, the steel value of our fleet has improved by about 13% from the end of 2023. Given the recent overall strength of the market, each segment has performed well with the container ship segment increasing the most. I would also note that these steel values do not give any consideration to our contract backlog, which today is about $3.3 billion. With a stable and performing fleet, our fleet metrics are strong. Our adjusted dividend is up 6% over the first quarter of 2023 and 30% over the first quarter of 2022. Since year end 2022, we have increased our cash balance by 82% to $318 million. Our current net leverage is 34% and improvement of 420 basis points over year end 2023. Therefore, we are the gliding path to a target net leverage range of 20, 25%. I now turn the presentation over to Mr. Stratos, the ship's Navios partners chief operating officer. Stratos.

Thank you, and good morning all. Please come to slide nine, which details our operating three cash flow potential for the remaining nine months of 2024. We have fixed 67% of our available days at an average rate of $25,874 net per day. This contracted revenue exceeds our total cash expense by 53.3 million, and we also have 13,820 remaining open or index linked days that could provide potential additional free cash flow. On the right side of the slide, we provide our 42,112 available days by vessel type, so you can perform your own sensitivity analysis. However, whatever number used, we should develop substantial cash flow for the remaining nine months of 2024. Please turn to slide 10. We are always renewing the fleet so that we maintain a young profile. It is part of our strategy to reduce our carbon footprint by modernizing our fleet, benefiting from new technologies and eco-vessels with greener characteristics. During 2024, we get delivery of three vessels, two 5,300 TU container ships, both chartered out for an average of 5.2 years at an average net daily rate of $37,050 net per day, and one LR2 Aphra Max vessel, which has been chartered out for five years at $26,366 net per day. The contracted revenue of the three vessels delivered amounts to approximately 190 million. Following these deliveries, we have 1.6 billion remaining investment in 26 new building vessels delivering to our fleet through 2027. In container ships, we have nine vessels to be delivered with a total acquisition price of approximately 672 million. We have mitigated this risk with long-term credit-worthy charters, generating about 0.9 billion in revenue over a .8-year average charter duration. In the tanker space, we acquired 17 vessels for a total price of approximately 950 million. We chartered out 11 of these vessels for an average period of five years, generating revenues of about half a billion. We have also been opportunistically replacing older vessels. In 2024, we have sold four vessels with an average age of 17.7 years for 92.6 million. At the same time, we exercised the purchase option on four chartered in Chattanoos-built cancer maxis with an average age of 7.6 years for a total price of 116.6 million. Moving to slide 11, we continue to secure long-term employment for our fleet. In 2024, we have created about 210 million additional contracted revenue. Approximately 130 million can form our tanker fleet about 41.5 million from three container ships, and 40 million comes from our dry bulk fleet. Our total contracted revenue amounts to 3.3 billion. 1.2 billion relates to our tanker fleet, 0.4 billion relates to our dry bulk fleet, and 1.7 billion relates to our container ships. Charters are extending through 2037 with a diverse group of quality counterparts. About 50% of our contracted revenue is expected to be earned in the next two and a half years. I now pass the call to Eri Cironi, our CFO, which will take you through the financial highlights. Eri?

Thank you, Stratos, and good morning, all. I will briefly review our unnoticed financial results for the first quarter of 2024. The financial information is included in the press release and summarized in the slide presentation available on the company's website. Moving to the earnings highlights in slide 12, total revenue for the first quarter of 2024 increased by 3% to 319 million compared to 310 million for the same period in 2023. Available days decreased by 3% to 13,540 compared to 13,900 days for the same quarter last year. Our combined fleet time charter equivalent rate increased by 3% to 21,514 per day compared to 20,811 per day for the same period in 2023. In terms of sector performance, our TCE rate for our dry bulk vessels improved by 29% to 14,209 per day compared to 10,998 per day for the same period last year. The time charter equivalent rate for our tankers was 28,087 per day, which is in line with Q1,2023 levels, whereas our container TCE rate decreased by 15% to 29,838 per day. EBITDA for Q1,2024 and Q1,2023 was positively affected from gains from vessel sales equal to 2 million and 33 million respectively. Adjusted EBITDA for Q1,2024 increased by 9 million to 164 million. Adjusted net income for Q1,2024 increased by 8% to 71 million compared to 66 million in Q1,2023. Adjusted earnings per common unit for Q1,2024 with $2.32. Turning to slide 13, I will briefly discuss some key balance sheet data. As of March 31st, 2024, cash and cash equivalents including restricted cash and time deposits in excess of three months were 318 million. During the first quarter of 2024, we paid 55 million net of related debt of pre-delivery installments under our new building program, vessel acquisitions and other capitalized expenses. We sold one vessel for 10 million net adding about 5 million cash after the repayment of its respective debt. Long-term borrowings including the current portion net of deferred fees were 1.9 billion which is in line with Q4,2023 levels. Net debt to book optimization decreased to 33.6%. Slide 14 highlights our debt profile. We continue to diversify our funding resources between bank debt and leasing structures while 36% of our debt has fixed interest at an average rate of 5.6%. We also try to mitigate part of the increased interest rate cost having reduced the average margin for our floating bed by approximately 40 basis points to .3% from .7% at 2022 year end. Furthermore, our strong cash balances contributed 3.4 million of interest income. Our maturity profile is staggered with no significant volumes due in any single year. In terms of our new building program, approximately 75% of our new building financing is already concluded or in documentation phase at an average margin of .8% for floating rate debt. Then into slide 15, you can see our ESG initiatives. We continue to invest in new energy efficient vessels and reduce emissions through energy saving devices and efficient vessel operations. In February, 2024 Navios and collaboration with the Lord's Register founded the Global Maritime Emission Reduction Center that will focus on optimizing the existing global fleet efficiency. Navios is a socially conscious group whose core values include diversity, inclusion and safety. We have strong corporate governance and clear code of ethics while our board is composed by majority independent directors. I now pass the call to Ted Petron to take you through the industry section. Ted?

Thank you, Eri. Please turn to slide 17 for a view of the current trade disruptions. The Red Sea entrance leading to the Suez Canal, a strategic maritime transit point, continues to operate at restricted transit levels. Red Sea disruptions have caused a rerouting of ships via the Cape of Good Hope, increasing cost at 10 miles. Since the first half of December, transits have reduced by 59% for containers, 40% for tankers and 55% for dry boat vessels. Panama Canal daily transit restrictions stand at about 33% below normal, with additional transits anticipated by month end. Please turn to slide 19 for a view of the tanker industry. World GDP grew at .2% in 23, similar growth expectation in 24, based on the IMF's April forecast. In spite of economic uncertainties in the crisis in the Ukraine and Red Sea, the IEA projects a 1.2 million barrel per day increase in world oil demand for 2024. Chinese crude imports continued at healthy levels, averaging at 11 million barrels per day in Q1. After a seasonally strong Q4 in 2023, rates remain firm on the back of rising demand and increasing refinery throughput. The OPEC plus crude export costs have been mitigated by increased Atlantic to Far East exports, increasing ton miles. Additionally, seaborne crude and clean trading patterns, which were initially diverted to longer haul routes due to the Russian sanctions, have once again been rerouted by the above-mentioned Red Sea disruptions. These even longer route hauls continue to increase ton miles, putting upward pressure on both costs and rates. Turning to slide 20, as previously mentioned, both crude and product rates remain strong across the board due to healthy supply and demand fundamentals and shifting trading patterns. Product tankers are also aided by healthy refinery margins and discounted Russian crude exported to the Far East, frequently returning to the Atlantic as clean product. Crude ton miles are expected to grow at .2% in 2024 and a further .6% in 2025. Similarly, product tanker ton miles are expected to grow 7% in 2024 and additionally .4% in 2025. These percentages increases anticipate some continued canal restrictions. Turning to slide 21, BLCC net fleet growth is projected to be negative for both 24 and 25 at .8% negative and .8% negative respectively. This decline can be partially attributed to owners' hesitance to order expensive long-lived assets in light of macroeconomic uncertainty and engine technology concerns due to CO2 restrictions enforced since the beginning of this year. The current low order book is only .6% of the fleet or only 50 vessels, one of the lowest in 30 years. Vessels over 20 years of age are about 17% of the total fleet or 156 vessels, which is about three times the order book. Turning to slide 22, projected product tanker net fleet growth is .5% for 2024 and .7% for 2025. The current product tanker order book is .3% of the fleet and is approximately equal to the .5% of the fleet, which is 20 years of age or older. It concludes the tanker sector review. The tanker sector, tanker rates across the board continue at historically healthy levels. The combination of below average global inventories, growth and oil demand, and new longer trading routes for both crude and products, as well as one of the lowest order books in three decades and the IMO 2022 regulations should provide for healthy tanker earnings going forward. Please turn to slide 24 for review of the dry book industry. Stronger-legged exports of coal, iron ore, and grain continued in the new year with the BDI averaging 1824 for Q1, an 80% increase over Q1 of 2023. This counter-cyclical strength led by the CAPES lifted the CAPE average earnings to 24,286, the highest Q1 average since 2010. Dry book trade is expected to grow by .6% this year, enhanced by a .4% increase in tonnwiles, with most of the growth anticipated to come from additional Atlantic exports of the above-mentioned cargoes plus bauxite, the vast majority destined to China and Southeast Asia. Going forward, supply and demand fundamentals remain intact, longer duration trades, the historically low order book continuing canal restrictions and tightening DHG emissions regulations remain positive factors, which are reflected in the S&P period and SFA markets. Turning to slide 25, the current order book stands at .3% of the fleet, one of the lowest since the late 1990s. Net fleet growth for 2024 is expected to be only .9% and .4% in 2025, as owners remove tonnwiles that will be uneconomic due to the IMO 2023 CO2 rules enforced since the beginning of the year. That's as over 20 years of age or about .9% of the total fleet, which compares favorably with the low order book. In concluding our dry bulk sector review, continuing demand for natural resources, restrictions in transiting both the Panama and Suez canals, war and sanction related longer haul trades combined with slowing pace of new building deliveries all support freight rates going forward. Please turn to slide 27 for a review of the container industry. Unexpected strength in the trade flow coupled with continued rerouting of vessels away from the Red Sea and around the Cape of Good Hope, increased tonnwiles pushing the SCFI back up to 2003, 306 last week, the highest level outside the pandemic era. Uplift pressure for time travel rates should remain for the duration of the Red Sea disruption. However, continuing record fleet growth should eventually modify these gains and reverse course when the Middle East conflicts settles. Although the trade is expected to grow by .1% in 2024 and 3% in 2025, new building deliveries in 2024 and 25 will be equivalent to approximately 17% of the fleet after reckoning net fleet growth of 9% this year followed by .9% in 2025. This should continue to put pressure on range for some time. Turn to slide 28, net fleet growth is expected to be 9% for 2024 and a further .9% for 2025. The current order book stands at .7% against .9% of the fleet 20 years of age or older. About 73% of the order book is for 10,000 TEU vessels or larger. In concluding the Container Sector Review, longer term supply and demand fundamentals remain challenged due to economic and geopolitical uncertainties in an elevated order book. However, trade growth improvements, increasing tonnwiles and world GDP growth, the .2% for 2024 provide a counterpoint to a challenging 2024. This concludes our presentation. I would now like to turn the call over to Angeliki for a final comment. Angeliki?

This completes our formal presentation. We open the call to questions.

Thank you. At this time, if you would like to ask a question, please press star one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. Once again, that is star one to ask a question and star two to remove yourself. We will pause for just a moment to assemble the question queue. We'll go now to Omar Nakoda with Jeffreys. Please go ahead.

Thank you. Hey guys, good morning, good afternoon. Thanks for the update. Sounds like and looks like things are going quite nicely for Navio. It's with all three pillars of your business going well. Tankers, drywall, containers, they all seem to be in decent shape. Does that change anything in terms of deploying capital or monetizing assets for you or is it more of the same where we can just expect you to continue to fine tune the fleet?

Yes, we like boring things. Good morning. Basically, I mean, we are four months into the year. We are about 67, 70% fleet. And we can see that basically from slide seven, we have 53 million revenues above cash above our cash expenses. So that gives us a comfortable position. It gives us visibility and we can see that this year will develop as or better than 2023. So this gives us ability to further implement as properties. You have seen our cash building up, even though we have a lot of new building payments and our leverage going down. Basically on the other side, you have to mitigate the market risk. That's the big thing. And we are doing that as you can see constantly.

Thanks, Angeliki. Is there, thanks for that. Is there any kind of, just in terms of what we're seeing in the market today, it seems like there's plenty of opportunity. You've obviously been very active. Is there a segment or asset class that you would say stands out as compelling above the rest at this point, whether it's for new investments or potentially the data investment?

Yes, and we are optimistic on this when we see values that make sense on all the investments we will sell. I mean, we have relationships and build on new buildings are a little bit more difficult because values have moved up. So you need to make sure that the transaction, that the new building that you are actually ordering, which is basically a liability unless you actually are able to fix it at an attractive return and a good residual value risk. This is the thing that we are constantly monitoring. With the values of new buildings going up, it's more difficult to actually execute on that strategy because you need to see rates going up or you have to have certain relations. On the fourth message is about, you know, we see transactions, but it's all the good long-term charges which are even dry picking up during longer durations at attractive rates. But it's always also is influenced by the red C, which let's not forget that the red C can disappear at any moment and that will be a good thing. And that will fundamentally change the rate environment we're living.

Right, yeah, no, definitely, good point. And maybe just one final one for me. You know, you've had the stated goal now for some time of trying to get leverage down to that 20 to 25% level. I guess one question is, you know, it seems perhaps that's achievable over the next maybe 12 to 18 months. The question would be, is that something you also see as a realistic time period to get leverage that low? And then also, have you thought about what happens to novice once you achieve that goal? Does anything change strategically going forward? Thank you.

The goal to reach it may be about a year from today as we get the vessels into the water because the D level, let's not forget that basically on the leverage ratio, we do not count, you know, the backlog that we have. We have about 3.3 billion of contracted revenue that creates a good buffer, a good visibility for the further years. And as you saw this year, we are already getting our new buildings into the water which as we get them, we D level automatically. So this is a process that you will be watching very a lot on the remaining of the year and the beginning of the next. And, you know, this is a goal, is an end result. You are gliding to that direction and we are also building the cast.

Thank you. Got it, thank you Angeliki, appreciate it. I'll turn it over.

We have no additional questions standing by at this time. I'd like to turn the floor back over to Angeliki Frengeau for any additional closing comments.

Thank you, this completes our first quarter exam.

Thank you. Once again, ladies and gentlemen, that will conclude today's call. Thank you for your participation.