Navios Maritime Partners Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 23, 2023

There are 9 speakers on the call.

Operator

Thank you for joining us for Navios Maritime Partners First Quarter 2023 Earnings Conference Call. With us today from the company are Chairwoman and CEO, Ms. Angeliki Fango Chief Operating Officer, Mr. Stratos De Seabries Chief Financial Officer, Ms. Arie Cironi and Vice Chairman, Mr.

Operator

Ted Petrone. As a reminder, this conference call is being webcast. To access the webcast, please go to the Investors section of Navios Partners' website at www. Navios mlp.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 will also be found there.

Operator

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 Marriott Partners. Forward looking statements are statements that are not historical facts. Such forward looking statements are based upon the current beliefs and expectations of Navios 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 Navios Partners' filings with the Securities and Exchange Commission.

Operator

The information set forth herein should be understood in light of such risks. Navios 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. Van Gogh will offer opening remarks. Next, Mr.

Operator

DeCiebreos will give an overview of Navios Partners segment data. Next, Mr. Roni will give an overview of Navios Partners' financial results then Mr. Petrone will provide an industry overview and lastly, we'll open the call to take questions. Now I turn the call over to Navios Partners' Chairwoman and CEO, Ms.

Operator

Angeliki Fangou. Angeliki? Good morning to all

Speaker 1

of you joining us on today's call. I am pleased with our results for the Q1 of 2023, in which We reported revenue and net income of $309,500,000 $99,200,000 respectively. We are also pleased to report net earnings per common unit of $3.22 for the Quater. Navios Partners is a leading publicly listed shipping company diversified in 15 asset classes in 3 sectors with an average vessel age of about 9.6 years. We have 173 vessels split roughly equally in 3 sectors based on adjusted adjusted value.

Speaker 1

In addition to diversification, we have been actively managing our portfolio to maintain a younger, more technologically advanced fleet as we believe The newer technologies are a competitive advantage both in terms of operating efficiencies and also for fuel emissions. We have rationalized our fleet by selling old vessels and acquiring new vessels. As I said last quarter, we are also focused on reducing leverage rates. Most recently, we reduced our net APV to about 42% in the Q1 of 2023 from about 45% in the Q4 of 2022, measured for vessels in the water. Our stated goal is to continue to reduce leverage so that our net LTV falls within a range of 20% to 25%.

Speaker 1

Please turn to Slide 7. We continue to finance our newbuilding program on attractive terms. Since our last earnings, we secured $438,600,000 of new financing at an average margin of 1.8%, $343,600,000 of which financed 6 newbuilding vessels. We have also refinanced $95,000,000 for 8 tanker vessels at the same average margin. We have also taken advantage of market conditions to secure $161,000,000 of long contracted revenue and to sell vessels generating $242,200,000 in gross sales proceeds.

Speaker 1

As to contracted revenue, we have secured $52,700,000 for 2 tankers over 2.7 years and $107,800,000 for 7 container ships over 2 years. For sales, we sold 8 vessels for $160,300,000 in the Q1 of 2023 and expected to close on the sale of the remaining 5 vessels for an additional $81,900,000 in the Q2 of 2023. Our operating cash flow is strong. For the remaining 9 months of 2023, our Revenue is expected to exceed total cash cost by $70,200,000

Speaker 2

With 15,469

Speaker 1

open and index days, we would expect to generate significant additional cash in 2023. Please turn to CI Tech. We implemented our diversified strategy in late 2020. Since then, we have made 3 significant acquisitions, a container ship company with 29 vessels in the Q1 of 2021, a tanker company with 45 vessels in the Q3 of 2021 and a 36 vessel drybulk fleet in the Q3 of 2022. As a result of this transformation, Our financial performance has strengthened materially, which this slide demonstrates by referring to adjusted EBITDA.

Speaker 1

$155,400,000 of Q1 2023 adjusted EBITDA represents a 23.2% increase over the Q1 of 2022 and 361.1% increase over the Q1 of 2021. Our 2022 adjusted EBITDA of $667,900,000 represented a 56.6% increase compared to 2021 and a 569.2% increase compared to 2020. I now turn the presentation over to Mr. Stratos Desypris, Navios Partners' Chief Operating Officer. Stratos?

Speaker 3

Thank you, Angeliki, and good morning all. Please turn to Slide 9, which details our strong operating free cash flow potential for 2023. We fixed 63 percent of available days at an average rate of $27,688 net per day. Our contracted revenue exceed expected total cash expense for the remaining 9 months of 2023 by over $70,000,000 We have 15,469 open index linked days that will provide additional profitability once fixed. Slide 10 demonstrates the basic principles of our diversified platform in action.

Speaker 3

We aim to benefit from countercyclicality, which creates the opportunity to deploy cash flows from well performing segments into assets in underperforming segments. We believe a diversified asset base moves volatility on our financial statements. You can see this dynamic playing itself out in our asset base. As of Q1 2023, container values dropped by 4%, Well, drybulk and tankage were vessel values increased by 9% and 2%, respectively. In sum, the net change to our fleet values is an increase of approximately 3%.

Speaker 3

Multiple segments also allow us to optimize shuttering. In segments with attractive returns, we can enter into period charters. In other segments, we can be patient. As you can see from the chart on the bottom of the slide, we have fixed 86% of our 13,602 total available days the Q2 of 2023 at a net average rate of $25,654 per day. Our containerships are 100 percent fixed at $38,613 net per day, our tankers 90% at $28,033 net per day and our dry bulk fleet is 79% fixed at $17,458 net per day.

Speaker 3

In Slide 11, you can see our fleet renewal activities. We are always renewing the fleet so that we maintain the joint profile, benefiting from new technologies and more carbon efficient vessels. We have $1,400,000,000 remaining investment in 21 newbuilding vessels that we delivered to our fleet through 2026. In our containerships, we are acquiring 12 vessels for a total of 860,000,000 We hedged our investment by entering to long term credit worth of charters, generating about $1,100,000,000 in contracted revenue for about 6.5 years average duration of the related charges. In the tanker space, we entered the LR2 Aframax subsector by ordering 6 vessels for a total price of approximately $380,000,000 These vessels have been charter out for 5 years at an average net rate of $26,580 net per day, generating revenues of approximately 290,000,000 We have also ordered 2 high spec MR2 vessels for about $80,000,000 Finally, on the drybulk fleet, We have one Capesize vessel on order that will be delivered in June 2023, which has been chartered out for 5 years at a net rate of almost $20,000 per day.

Speaker 3

Who have been also very active and opportunistically selling all their vessels tailored to segment fundamentals. Year to date, we have sold a total of 15 vessels with an average age of approximately 14.5 years for 242,200,000 We sold 7 tanker vessels for a total consideration of about $160,000,000 taking to advantage a strong tanker market and the corresponding increase in demand for 2nd hand tonnage. Also, we sold 6 drybulk vessels for a total price of 82,400,000 Moving to Slide 12, we continue to secure long term deployment for our fleet. As Angeliki mentioned earlier, in Q4, we have created over $160,000,000 additional contracted revenue. Approximately $110,000,000 relates to 7 container ships charter for an average of 2 years at an average net rate of $21,296 net per day.

Speaker 3

Also, we have contracted 2 tanker vessels for another duration of 2.7 years at a net rate of $27,089 per day expected to generate over $50,000,000 in revenue. Our total contracted revenue amounts to 3,400,000,000 dollars 800,000,000 relates to our tanker fleet, dollars 400,000,000 to our drybulk fleet, while $2,200,000,000 of our contracted revenue comes from our containerships with charters extending through 2,036 with a diverse group of quality counterparties. About 55% of this contracted revenue from container ships will be early 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?

Speaker 2

Thank you, Stratos, and good morning, all. I will briefly review our unaudited financial results for the Q1 of 2023. The financial information is included in the press release and is summarized in the slide presentation available on the company's website. Moving to the earnings highlights on Slide 13. Total revenue for the Q1 of 2023 increased by 31% to $309,500,000 compared to $236,600,000 for the same period in 2022.

Speaker 2

Time charter revenue for the period is understated by $13,000,000 because U. S. GAAP rules require the recognition of revenue for our charters with de escalating rates on a straight line basis. Available days increased by 24% to 13,009 $108,000,000 compared to $11,228,000 for the same quarter last year. Our average time charter equivalent rate increased by 2% to $20,811 per day compared to $20,386 per day for the same period in 2022.

Speaker 2

In terms of sector performance, both tankers and containers enjoyed improved rates compared to the same period last year. TCE rates for our tankers increased by 86% to 28,477 and for our containers by 29% to 34,000 987. In contrast, our dry fleet TC rate was 45% lower compared to the same period last year at $10,998 EBITDA for Q1 20 20 increased by 50 percent to $188,800,000 compared to $126,100,000 for the same period last year. Time charter and voyage expenses increased by $22,700,000 as a result of higher bunker expenses as a number of our vessels were employed on freight voyages and higher bareboat and charter in higher expenses following recent vessel acquisitions. Operating expenses and general and administrative expenses increased mainly due to the expansion of our fleet.

Speaker 2

Net income for Q1 2023 increased by 16% to 99,200,000 compared to $87,000,000 $85,700,000 in Q1 2022. Earnings per unit were $3.22 Net income was negatively affected by a $22,300,000 increase in interest expense, mainly as a result of the increase in our average interest rate cost from 3.7% in Q1 2022 to 7% in Q1 2023. Turning to Slide 14, I will briefly discuss some key balance sheet data. As of March 31, 2023, cash and cash equivalents were 213,200,000 In Q1 2023, we paid $62,100,000 of pre delivery installments and other capitalized expenses under our new building program and $51,300,000 for vessel acquisitions and improvements. We sold 8 vessels for $157,700,000 net, adding $100,800,000 cash after the repayment of their respective debt.

Speaker 2

Our other current assets decreased mainly due to the decrease in accounts receivable from charters, which were settled post year end. Our other current liabilities decreased following the payments made in accordance with the vessel management agreement. Long term borrowings, including the current CorSo net of deferred fees amounted to $1,870,000,000 Net debt to book capitalization decreased to 38.4 Priscent. Slide 15 highlights our debt profile. We continue to diversify our funding sources between bank debt and leasing structures, while 32% of our debt has fixed interest at an average rate of 5.6%.

Speaker 2

We also try to mitigate part of the increased interest rate costs having reduced the average margin for our floating debt by 50 basis points to 2.6% from 3.1% in Q1 2022. Our maturity profile is staggered with no significant balloons view in any single year. Slide 16 gives an update of the Q1 2023 TED developments. In terms of our newbuilding program, approximately 75% of our newbuilding debt is already concluded or 91% if we include those in documentation phase at an average margin of 1.8%. We have used the opportunity to expand our financing resources, adding new banks and resource, while we have also included our first export credit agency backed facilities in China and South Korea.

Speaker 2

Finally, we have arranged 95,000,000 of new financings for existing vessels at an average margin of 1.8%, representing an improvement of 171 basis response from the previous financings. Turning to Slide 17, you can see our ESG initiatives. We aspire to have net 0 emissions by 2,050. In this process, we have been pioneering by investing in new energy efficient vessels and reducing emissions through energy saving devices and efficient vessel operations. Navios is a socially conscious group whose core values include diversity, Inclusion and Safety.

Speaker 2

We have very strong corporate governance and clear code of ethics. Our Board is composed by majority independent directors and independent committees that oversee our management and operations. I'll now pass the call to Ted Petrone to take you through the industry section. Ted?

Speaker 4

Thank you, Ari. Please turn to Slide 20 for the review of the tanker industry. World GDP is expected to grow 2.8% in 2023 based on the last April forecast and is forecast to be 3% in 2024. There is an 85% correlation of worldwide demand to global GDP growth. In spite of economic uncertainties in the Ukraine crisis, the IEA projects a 2,200,000 barrels per day or 2.2% increase in world demand for 2023 to 102,000,000 barrels per day, exceeding 2019 pre pandemic levels.

Speaker 4

China in particular accounts for 60% of global oil demand growth in 2023, rising 1,300,000 barrels per day or 8.8% over 2022 to average an all time high of 16,000,000 barrels per day. After a strong Q4 across all asset classes, firm tanker rates continued in 2023 on the back of strong supply and demand fundamentals, minimum fleet growth and shifting trading patterns resulting in longer haul trade routes, especially for Suez and Aframax. Recent declines in U. S. Crude exports and OPEC cuts, although less than the headline numbers, have put downward pressure on VLCC rates, particularly out of the NEG.

Speaker 4

Turning to Slide 21. Tanker rates across the board remain strong due to previously mentioned supply and demand fundamentals combined with the invasion of Ukraine, which has shifted Russian crude and product exports to longer haul routes out to India and China. Additionally, European refineries are replacing Russian crude with products with supply from the U. S, Brazil and the Middle East for the increasing ton miles and Trade Inefficiencies. Product tanker should also be aided by discounted Russian crude exported to the Indian Ocean and Far East returning to the Atlantic as clean product.

Speaker 4

This could add upward pressure on already strong rates. 2023 crude and product ton mile growth is expected to increase 5.6% and 10.9%, respectively, with continued ton mile growth in 2024. Turning to Slide 22. VLCC net fleet growth is projected at 2.1% for 2023 and negative fleet growth of negative 1.5 percent for 2024. 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 the CO2 restrictions in force since the beginning of this year.

Speaker 4

The current record low order book is only 1.4% of the fleet or only 13 vessels, the lowest in 30 years. 11 VLCCs were delivered during the balance of this year, none in 24 and none in 2025 and 2026. Vessels over 20 years of age are 14% of the total fleet or 127 vessels, which is about 10 times the order book. Turning to Slide 23. Product tanker net fleet growth is projected at 1.6% for 2023 and only 0.3% for 2024.

Speaker 4

The current product tanker order book is 8% of the fleet or 188 vessels, one of the lowest on record and it compares favorably with the 9.9% of the fleet or 3 58 vessels, which are 20 years of age or older. Including the tanker sector review, tanker rates across the board continued at strong levels, combination of below average global inventories, oil demand returning to pre pandemic levels, new longer trade routes to both crude and products as well as the LOTUS order book in 3 decades and the IMO 2023 regulations should provide for healthy tanker earnings going forward. Please turn to Slide 25 for the review of the dry bulk industry. Normal seasonality in Q1 and slower than expected recovery in the Chinese economy put downward pressure across all asset classes, particularly Capesize. The Baltic Dry Index, the BDI averaged only 1011, a circa 50% reduction from the same period last year and the lowest quarterly average since Q2 of 2022.

Speaker 4

Overall, the Chinese reversal of a 0 COVID policy and the additional fiscal stimulus combined with the weakening U. S. Dollar point to stronger demand during the second half as indicated by higher import numbers for iron ore coal as well as higher futures on all asset classes. Overall dry bulk trade in 2023 is projected to increase by about 2%. Going forward, long term supply and demand fundamentals remain intact.

Speaker 4

China's reopening economy, the historically low order book, declining net fleet growth during the latter part of this year and into 2024, softening U. S. Dollar and tightening GHG admissions regulations remain positive factors. Please turn to Slide 26. With regard to iron ore, following the reopening of the Chinese economy, China's GDP grew by 4.5% in Q1 of this year.

Speaker 4

Further, China's fiscal stimulus focus on supporting the real estate sector should boost iron ore demand in the second half of twenty twenty three. Overall, global iron ore trade is expected to increase by 0.6% in twenty twenty three with trade increasing by 8.1% in the second half of twenty twenty three over the first half of this year. Concerning coal, global coal consumption reached a record 8 0.025000000000 tons in 2022, and that figure is expected to be surpassed in 2023. The Ukraine crisis continues to impact Global Coal Imports as European Supply Concerns Persist. The EU ban on Russian coal will lead to shifting trading patterns toward longer haul routes.

Speaker 4

Overall, 2023 seaborne coal trade growth is expected to be supported by an estimated 4.4% growth in ton miles. Additionally, total trade is expected to increase 5.4% in the second half of twenty twenty three over the first half of this year. On the grain side, global seaborne trade Volume is negatively impacted by the war in Ukraine, but is expected to increase by 3.2% this year. Trade route adjustments due to the war are shifting trading patterns toward longer haul routes. The global grain trade continues to be driven by heightened food security issues, driven initially by the pandemic.

Speaker 4

Ton mile growth is expected to increase by 4% in 2023 due to the war and weather related crop harvest issues. Please turn to Slide 27. The current order book stands at 6.9% of the fleet, one of the lowest since the early 1980s. Net fleet growth for 2023 is expected at 2.4% and only 0.6% in 2024 as owners removed tonnage that has become uneconomic Due to the IMO 2023 CO2 rules enforced since the beginning of this year, vessels over 20 years of age are about 8.8% of the total fleet, which compares favorably with the historically low order book. And concluding our dry bulk sector review, continuing demand for natural resources, China's reopening more and sanction related longer hold trades combined with slowing pace of newbuilding deliveries, all support freight rates going forward.

Speaker 4

Please turn to Slide 29 for a review of the container industry. After 3 consecutive quarters of falling rates, the Shanghai Container Freight Index, SCFI, may have found the floor, at least temporarily as the index bounced off a low of 9.07 in March and currently stands at 9.72, which is still higher above the historical pre COVID averages. This is mainly due to China's reopening, its 4.5% GDP growth in Q1 and increasing exports and in turn increasing box and time charter rates recently. Global Container Trade is expected to remain under pressure in 'twenty three from macroeconomic issues, including inflation, the war in Ukraine and elevated deliveries. As you'll note in the graph in the lower right, the U.

Speaker 4

S. Retail inventory to sales ratio is off to recent low, but still well below the long term average. The graph on the lower left shows a continuing growth in U. S. Consumer purchases of goods, which is still above pre pandemic levels.

Speaker 4

Imports to the U. S. Have slowed, easing port takeaway bottlenecks and port congestion. Container ship rates have tightened recently, surprising most analysts as imports continue and Newbig deliveries are slow to hit the water. Overall, 2023 container trade is projected to decrease by 1.1% in 'twenty but increased by 3.3% in 2024.

Speaker 4

Turning to Slide 30. Net fleet growth is expected to be 6.9% for this year and 5.8 for 2024. The current order book stands at 28.4% against 11.4% of the fleet 20 years of age or older. About 72% of the order book is for 10,000 TEU vessels or larger. In concluding the container sector review, Although supply and demand fundamentals remain challenged due to economic and geopolitical uncertainties, the combination of China's reversal of its 0 COVID policy, additional fiscal stimulus and the IMF's April revision to world GDP growth to 2.8% in 2023 and 3.0% in 2024 provide a counterpoint to a challenging 23.

Speaker 4

This concludes our presentation. I'd like now to turn the call over to Angeliki for her final comments. Angeliki?

Speaker 1

Thank you, Jess. This concludes our formal presentation. We open the call to questions.

Speaker 5

Thank you. At this time, we will open the floor for questions. Our first question comes from Omar Khanna with Jefferies.

Speaker 6

Thank you. Hi, guys. Good afternoon. First, just wanted to maybe ask strategically about the business and obviously the balance sheet. You've gotten the net LTV down to 42% from 45% last quarter.

Speaker 6

Your aim or target is to get it to that 20%, 25% threshold. It looks like you're on pace to get there perhaps over the next couple of years. I wanted to ask, is there something you're looking to do strategically when you get to that point Versus not being able to do that now? Or is it just simply you're looking to delever to have that added flexibility down the line?

Speaker 1

Good morning, Omar. I mean, this is by the way, I think that You got it well. We are well positioned. We are generating the cash. I mean, the first five model is performing well.

Speaker 1

Our $4,500,000,000 assets in the Q1 generated cash and brought our net LTV from 45% In Q4 to 42. And basically, you have now 3 sectors. The containers that we were cautious, we saw that this they are performing better than we thought. We did over $100,000,000 of contracted revenue from 5 vessels and Over the 2 years, and we are seeing and this is actually performing much better than we thought. On the tankers, the other sector we are in, We see structural changes, strong ton mile demand on crude, strong ton mile demand on product, restricted supply and good cash flows.

Speaker 1

And on the dry bulk, Second half of the year can be, because of China, much healthier than the first half. So with that background And knowing that we cover all our expenses and we have $40,000,000 of above our expenses For the remaining 9 months, you know that we have 16,000 days. You do your own calculation of what the rates will be Every 10,000 we provide $160,000,000 of free cash. And this is about At the end of the story, about total returns. We bring in our net LTV down to 2025 And it's about our total returns.

Speaker 1

By doing, we should be able to measure on this total return and we have I think we have done well. And I will put a slide on that. If you look since 2020 when we started This strategy, this diversified strategy, and we hope that we will do well in the future. Is appraiser, but also a very steady strategy we have articulated over the last quarter.

Speaker 6

Thanks, Angeliki. Yes, that's clear. And then just in general in terms of how you are Clearly, you have the portfolio approach. You're diversified across 3 segments. And each market is moving in its own direction, presenting its own Opportunities and risks perhaps.

Speaker 6

But just as I kind of think about where you're positioned now, you've sold some older ships, you brought in some of that cash. Your new buildings you've mostly locked away on longer term charters, so you derisk those. In terms of kind of how we think about Navios and Strategically with it's a whether it's use of cash or just how it looks like fleet or manages it. Should we think Navios in the current environment is Perhaps, 1, a seller of older ships and then also a harvester of cash flows and then 3, Not going to be as acquisitive on the acquisition front as it has been. Is that fair to say?

Speaker 6

You're basically selling holderships, Harvesting cash and not being acquisitive.

Speaker 1

Yes, we are modernizing our fleet. That is a clear path, Getting more efficient vessels, it makes sense. And your investment your return on your investment is quite significant. We are actually Seeing that as we are there to do acquisitions depending on the opportunity. So we are not it is not I think what we like about the diversified platform is that we can have we can be able to capture every opportunity that comes to us Without being restricted one way or the other.

Speaker 1

I mean, you remember when we were doing drybulk in 2021 when we did our containers early on, then we did we entered a new sector in the tanker. We Spandita again on the tanker. So we can be very we will seek the best more attractive opportunity. Modernizing the fleet is something that we will be always ongoing. I mean, I think that creates on every aspect on the being more one efficient fuel efficiency is a driver in the market.

Speaker 6

Thank you. And maybe just one final one for me just about the containers because clearly that's been a nice source of visibility And you paid off a lot of those shifts significantly. So it's really the free cash is fairly significant from that stream of the business. I just wanted to ask about what we're seeing in the market today. Clearly, we went from a very quiet time charter market at the beginning of the year to one that's become much more active and You've been able to put away some shifts that are on the water today on medium term charters.

Speaker 6

Just wanted to

Speaker 7

ask, Yes. You do have

Speaker 6

a few vessels that roll off contracts during the next several quarters, not a tremendous amount, but you do have some that roll off. What are those contract discussions look like? And And then maybe are you able to give us a sense of how far in advance of when those ships would be scheduled to roll off? Would you be able to secure them on new contracts today?

Speaker 1

Actually, Omar, this is a very interesting. We were cautious about the sector, but We saw very healthy levels. We have basically fixed everything and Stratos will take you through. But Basically, we fixed everything at a very good and attractive rate. And what we see from the market is This is you can actually secure nice cash flows and visibility from that.

Speaker 3

I mean, no matter on the fixing for us, I mean, The latest transactions that we did was generated over $100,000,000 of contracted revenue for the next 2.7 years. And if you see no presentation. We have nothing left opening in 2023. So, okay, we have a vessel that the delivery period is Between, let's say, the end of the year and beginning of next year, but effectively there's nothing open. So we have fully covered our position on this sector.

Speaker 6

Thanks, Stratos. And I guess, say, for a vessel that's opening up in 6 or 7 months, Is now the time that you're having dialogue or is it or does that become much more of like an August September time period?

Speaker 1

We have fixed the container sector basically. We don't have anything open.

Speaker 3

So So yes, the ones that are coming next year, I think it's today it's too early to start thinking about that. I think this is a question that we will have towards going to the end of the next quarter. At the later part of Q3, this is when we will start discussing on the market and seeing what is the availability.

Speaker 6

Got it. Okay. Well, thanks Stratos and thanks Angeliki.

Speaker 5

Thank you. Thank you. Our next question comes from Chris Wetherbee with Citigroup.

Speaker 7

Good morning, good afternoon. This is Rob on for Chris. Good morning. I guess just to piggyback on that last question with regard to the Containership market. Could you give us a sense of what your expectations are for the back half of the year with regard To volume kind of across the broader industry and it sounds like we're starting to see a little bit of seasonality return to the containership Trade and how that kind of fits into your time charter approach.

Speaker 7

It would be great to get a little bit of color there.

Speaker 1

I think the good thing is that we are totally fixed for the container. We have only one vessel at the end of the year, but that will give you the container center idea.

Speaker 8

You see the use the NCFI as a proxy, right? It's a box rate, but use it as Proxy for the industry and it's kind of bounced off the bottom. So maybe we found the bottom here. You see the chart we have on one of the slides that U. S.

Speaker 8

Consumers continues to buy goods at There will be some pressure on the rates, but the good thing obviously we've already mentioned in the other question was we've fixed out for the year. But for us, I think the market, the second half could show some pressure on the bigger rates. Remember, most of our ships are below 13,000 TEU. And if you take the order book for the entire fleet, it's probably close to 30%, but for under 13%, it's probably around 13%, 14%. So That holds up well for our sector and I think that's why you've seen us be able to put our ships forward for period at some higher rates.

Speaker 7

Yes. No, that certainly has come across and you've been able to secure the vessels Over the past several quarters at some very good rates that are adding to your contracted revenue as well as generating some nice Free cash. So I guess as you look forward with regard to the vessels kind of looking out a year As some of those containerships come off charter, are you how do you think about kind of the redeployment? Would you Refer to have those under long term charters as well or if we're in a kind of a stronger demand environment, would you consider using some of those the way you're using your tanker We kind of more on shorter term charters.

Speaker 8

The model we have is to put out vessels on a medium to longer term charter according to where we On the cycle, when we get to the end of the year, if the cycle is different than we think, we may be putting out the ships on longer term. But let's see then where the cycle is For each sector, especially the containers. Maybe it surprises us like it did in Q1.

Speaker 7

No, Makes sense. And then you guys clearly have taken advantage of that with regard to some vessel sales as I just kind of tie a bow on So the leverage question, how should we be thinking about kind of the deleveraging? Are there more are you hoping to kind of do additional Vessel sales over the duration of 2023 or should we think about this as more Using the free cash flow that you're generating from your fleet to delever and get closer to your target leverage ratio.

Speaker 1

We have I think we have done a fair sale of the vessels that we had on our it's about 13 vessels that we already sold this year and we're going to be Already delivered in the Q1 and Q2. They may be a couple, but I think the majority of this has been completed. I think where we see the cash generation is in a very simple thing. We have contracted revenue that Our total expense by $70,000,000 for the remaining 9 months. And we have about Almost 16,000 open and index days.

Speaker 1

I mean, if you see on Page 9, you have the actual type of vessels in the open days. Calculate on that, whatever you assume, right, this is your strong cash flow generation. Every $10,000 it's about 100 over $150,000,000 So that's basically how you can delever quite significantly with the cash flows of the company.

Speaker 7

Makes sense. Appreciate the time.

Speaker 5

Thank you. That concludes our question and answer session. I'll now turn the call back over to Angeliki for any additional or closing remarks.

Speaker 1

Thank you. This completes our Q1 results. Thank you. This concludes

Speaker 5

today's call. Thank you for your participation. You may disconnect at any time.

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Earnings Conference Call
Navios Maritime Partners Q1 2023
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