Wall Street Transcript Interview with Angeliki Frangou, the Chairman & Chief Executive Officer of Navios Maritime Holdings Inc. (NM)

Wall Street Transcript

67 WALL STREET, New York - September 27, 2012 - The Wall Street Transcript has just published its Transportation and Logistics Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: FMCSA CSA Regulations - Retail and Industrial Transportation Demand - Truckload, LTL, Parcel, Rail and Intermodal - Capacity Constraints Result in Pricing Power

Companies include: Navios Maritime Holdings Inc. (NM), Navios Maritime Acquisition Corporation (NNA), Navios Maritime Partners L.P. (NMM), and many others.

In the following excerpt from the Transportation and Logistics Report, the Chief Executive Officer discusses the outlook for her company for investors:

TWST: Navios has been a public company for about eight years. Please give our readers a sense of how the company has grown and changed over that time.

Ms. Frangou: In 2005, we formed a company with about $200 million to invest in the dry bulk, because we recognized that we would need access to public capital to take advantage of the then-looming opportunity. We acquired Navios in 2005, when it had an enterprise value of about a half billion dollars. Since then, we grew the company into the Navios Group of companies, with a combined enterprise value of $4 billion.

You can also look at this growth from the perspective of the number of vessels we own. In 2005, Navios owned six vessels and chartered in another 20 vessels. Today, the Navios group owns 77 vessels and charters in another 25 vessels. Through this process, we have become a major force in shipping, with a large dry-bulk fleet and one of the fastest-growing companies in the tanker sector.

TWST: Where is the company experiencing growth today, and where does it anticipate growth opportunities over the medium to long term? Is it in one of the four companies or in particular geographic markets?

Ms. Frangou: International shipping is a global business grounded in general commercial activity. The macros for shipping have been and continue to be generally positive. In the long term, such as over the next 10 to 20 years, growth will continue to be driven by emerging markets in China, India, and of course, South America. Urbanization will continue. For example, China just reached 50% urbanization; India is progressing as well. The process of urbanization requires the continuous shipment of iron ore, coal and other infrastructure material.

Countries that are urbanized also experience a change in consumption patterns, with more proteins being consumed, which in turn requires more grains to be grown and water resources. We continue to see growth for the export market for these various products in Brazil and South America. In addition, China will continue to consume energy. Today, it is already the largest energy consumer globally, but on a per-capita basis a fraction of Europe and the U.S.

We believe we are experiencing a temporary slowdown in industrial production resulting from the crisis in Europe. There is a freezing of economic activity that is negatively affecting China, and in essence, thus other emerging markets. Stabilization in Europe will eliminate fear. When business leaders have more certainty, they will be more aggressive in their planning. In my opinion, fear of a potential meltdown in Europe is the biggest problem we are facing.

TWST: How does Navios manage the risks and uncertainties associated with that?

Ms. Frangou: We have a conservative approach. If you take it from a balance sheet view, shipping is a capital-intensive business, so we are always aware of our sources of capital. In the past, virtually all of the lending was done by commercial European banks. At Navios, we sought to diversify and developed access to the U.S. bond market. In fact, we have issued bonds for three out of the four companies of the group. Access to the U.S. bond market improves our access to commercial lenders.

We entered the U.S. bond market well before the crisis. We did all this preliminary work when money was freely available from the commerce banks at generous terms. This strategy of investing time and money to develop different markets has paid off. Today, we have a healthy balance sheet in an industry littered with balance sheets needing repair. To demonstrate, we do not have any debt maturities until 2017. Also, and equally important, we do not have any capex requirements. And at the same time, we're sitting on very strong liquidity. As a group, we have over $400 million of liquidity. Looking at the income statement, we have a strategy of long-term visibility of cash flows. Even in today's rate environment, we have contracted revenues that surpass the cost of our entire fleet. For each "open day," we will earn a profit if we charter the related vessel for anything above zero.

We are conservative because we know that shipping is a cyclical business. For us, cyclicality is not a question of "if," but a question of "when." And the "when" is generally sooner than we think and greater in intensity than we remember.

TWST: In terms of the cyclicality you mentioned, what trends are you seeing today in supply and demand and pricing?

For more from this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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