Overview: Navios Maritime Partners’ earnings (Part 6 of 12)
Rising cash flow and liquidity
Navios Maritime Partners (or NMM) believes that it has the ability to increase its distribution without any additional raisings. Dry bulk isn’t the only reason for the company’s growing distribution potential. Containers also bring NMM a breakeven. This creates NMM’s sufficient length and a cushion.
In order to provide cash-flow visibility, the company has been acquiring vessels with a long-term contract. Fixing a long-term contract with an investment-grade count of five generates significant cash flow. This ranks a distribution capacity.
At the end of the second quarter, NMM had total cash of $184.7 million. It had a total debt of $530.6 million. It will have a very low net debt or capitalization of 21.6% and no significant debt maturity until 2018.
Navios Partners’ peers include DryShips Inc. (DRYS), Diana Shipping Inc. (DSX), Navios Maritime Acquisition (NNA), and Navios Maritime Holdings Inc. (NM). The Guggenheim Shipping ETF (SEA) tracks the shipping companies.
Despite the acquisition of the two container vessels, NMM still has a significant cash balance to redeploy to vessel acquisitions. Cash and cash equivalents as of June 30, 2014, stood at $183.5 million—compared to $62.3 million as of June 30, 2013.
NMM records a cash dividend coverage ratio of 0.54—compared to 0.28 recorded by Navios Maritime Holdings (NM) and the industry average of 0.41. On a historical basis, NMM recorded 0.54 in 1Q14—compared to 0.29 in 4Q13 and 0.55 in 1Q13.
To support its cash flow generation, NMM has exercised the purchase option that it had in chartering vessels. Also, the company has been active in the sales and purchase market. NMM will continue to use the market to improve its fleet as opportunities become available.
NMM is supported by a strong balance sheet. It follows a capex replacement policy that enhances its cash flow. We’ll discuss this in the next part of the series.
Browse this series on Market Realist:
- Part 1 - Must-know: Navios Maritime Partners’ earnings overview
- Part 2 - Acquisition of fleets is increasing Navios Partners’ revenue
- Part 3 - Effective chartering strategy is supporting the company top-line
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- cash flow