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Edited Transcript of NM earnings conference call or presentation 20-Nov-18 1:30pm GMT

Q3 2018 Navios Maritime Holdings Inc Earnings Call

MONACO Jan 8, 2019 (Thomson StreetEvents) -- Edited Transcript of Navios Maritime Holdings Inc earnings conference call or presentation Tuesday, November 20, 2018 at 1:30:00pm GMT

TEXT version of Transcript

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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

* Laura A. Kowalcyk

Navios Maritime Holdings Inc. - VP of Corporate Communications

* 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

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Presentation

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Laura A. Kowalcyk, Navios Maritime Holdings Inc. - VP of Corporate Communications [1]

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Thank you for joining us for Navios Maritime Holdings Third Quarter and 9 Months 2018 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 Investor 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 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 call.

The agenda for today's conference call is as follows: we'll begin with formal remarks from the management team, and after, we'll open the call to take questions.

Now I 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, Laura, and good morning to all of you joining us on today's call. I am pleased with our results for the third quarter of 2018 for which we reported revenue of $141.5 million and adjusted EBITDA of $62.8 million. We continue to see the positive effects of a better charter market on our business results. Rate for the dry bulk vessels improved materially, with the time charter equivalent rate of our fleet for the third quarter of 2018 being about 50% higher than the third quarter of 2017. This has increased our adjusted EBITDA from core shipping operations by almost 250% in the third quarter of 2018 compared to the third quarter of 2017.

If you turn to Slide 3, we highlight how we are simplifying our structure. Regarding with the acquisition of Navios Midstream by Navios Acquisition, the related registration statement has been declared effective and the information statement have been made, and we expect the acquisition will be completed by the end of December 2018. Our timing was good. Since then, VLCC rates have recovered to around $40,000 per day.

We are also in the process of securing a leasing in the United States for Navios Maritime Containers. In an 18-month period, we acquired 26 container ships in Navios Containers. With the move from the Oslo OTC to NASDAQ's main market, we hope to facilitate increased liquidity for our shareholders.

On Slide 4, we focus on our diversification underlying our investment program. As you can see, Navios Partners is a firmer credit. It was recently upgraded to B2 by Moody's. This followed an upgrade by Standard & Poor's earlier this year. Navios Maritime Containers have strong credit ratios in a segment that continues to have promise. For NNA, we expect that the business and credit ratios will improve materially due to the combination with NAP and a healthier charter rate environment. In addition, the opportunities in South America for Navios Logistics remain excellent, and we have continued to build a robust business there.

Slide 5 highlights our strength and recent events. As a group, we believe we are a premier operator. Our overall scale of 210 vessels generate significant operating leverage. For 2017, this competitive advantage resulted in about $38 million of cost savings, measured by an estimate of our operating cost savings compared to our peers. We are also taking advantage of opportunities in related markets. We delevered our balance sheet by $67.5 million through the buyback of some of our ship mortgage notes and prepayment of our bank debt. Together, this will have saved us $4.3 million in annual interest.

As of our chartering initiatives, we chartered out 26 vessels on index-linked agreements, providing another charter rate equal to 110% of the expected index. Of these charters, 16 have a remaining period of more than 1 year. The charters provide Navios multiple options for fixing the charter rate for all or a portion of the remaining charter period. Accordingly, if the applicable period rates increase, we, Navios, can elect to fix these vessels for this rate for all or for part of the remaining period of the charter.

On the S&P front, we renewed our fleet with minimum capital outlay. Since the beginning of 2017, we added 5 vessels to our fleet on a net basis. As a result of these fleet renewal and expansion activities, we reduced our average age of our fleet by 17% and increased our fleet size by 8%.

Slide 6 shows the cash flow potential of our fleet. The time charter equivalent rate of $14,210 per day for the third quarter of 2018 was about 50% higher than the third quarter of 2017. For the fourth quarter of 2018, our fleet has 5,457 available days, of which 1,965 days or 36% of our days have market exposure. At current rates of $16,250 per day, our fleet would generate $15.8 million of free cash flow. If rates were to increase to a 20-year average, we will generate about $26.8 million of free cash flow. Our fleet is expected to then generate an additional $2 million for every $1,000 increase in charter rates.

Slide 7 sets forth Navios' cost structure. Our expected daily revenue for the fourth quarter of 2018 is $14,916. We fixed 64% of our available days at an average daily rate of $13,550. Daily revenue may increase by $972 based on an expected impact of the current market rates on open and index days and an additional $394 based on the current NNA and NMM dividend.

Our breakeven cost for the fourth quarter of 2018 is expected to be $12,023 per day. Our cost include all operating expenses, scheduled drydocking expense, charter-in expenses for our charter-in fleet, G&A cash expenses as well as interest expense and capital repayment.

Slide 8 highlights our strong liquidity position. Net debt to book capitalization was 71%, and we have cash of $143 million at September 30, 2018. We have no significant committed shipping growth CapEx or any material debt maturities until 2022.

I would like now to turn the call 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 9 presents our diversified dry bulk fleet, consisting of 70 dry bulk vessels totaling 7.1 million deadweight, 20 Capes, 32 Panamax, 18 Supermax and 2 Handysize. We continue to be one of the largest U.S.-listed dry bulk operators established over 60 years ago. We have 63 vessels on the water. The average age of fleet is 8 years, 16% younger than the industry average. Navios Group's total fleet of 211 vessels includes 56 tankers, 43 container vessels and 112 dry bulkers and is a highly diversified public shipping group.

Slide 10 shows about $38 million of estimated operating cost savings for Navios Holdings in 2017. To measure our efficiencies, we compared our operating cost to the published results of our peers. We computed our peers' operating cost by reviewing their 2017 20-Fs and related disclosures. As you can see on Slide 10, our analysis showed that NM's operating costs were estimated at approximately 42% lower than the average of the listed peers. We believe that these savings demonstrate the substantial competitive benefit we can generate and the value it delivers to all our stakeholders.

Please turn to Slide 12. The IMF forecasts world GDP growth at 3.7% for both 2018 and 2019. Emerging and developing Asian markets, which drive dry bulk demand, are expected to grow at 6.5% in 2018 and 6.3% in 2019. Dry bulk trade is forecast to grow by 2.5% in 2018, with ton mile growth forecast at 2.9% above the expected 2.8% net fleet growth.

The third quarter 2018 was a particularly strong quarter with the BDI up 28% versus Q2 2018 and up 41% year-on-year. The average Baltic Dry Index over the first 9 months of 2018 recorded a 31% increase over the same period in 2017. For Q4 to date, the average BDI is about the same average as Q4 of 2017 at this time. The dry bulk market still has substantial upside as the spot BDI is still about 70% below the 20-year average.

The Cape market volatility continues. After a very strong Q3, the market is showing some spot weakness driven by a series of temporary factors, such as reduced coal shipments, decreased congestion, logistical issues and falling sentiment as trade tensions continue. The forecast is to expect these negative issues to correct and the markets return to positive growth in charter rates as we progress towards January 1, 2020, in the new fuel regulations.

Turning to Slide 13. Worldwide steel production increased by about 5% in 2018 year-to-date. Through October, Chinese steel production rose by an impressive 9%. Chinese domestic demand has been stimulated by large infrastructure projects and recovery in the housing market. The Belt and Road Initiative is a cornerstone of the Chinese economic plans for the next 5 years and supports steel and power demand inside and outside China. Chinese steel mills continue to enjoy high profit margins as the domestic steel price remains relatively strong. Substitution of Chinese expensive, low-quality domestic iron ore with high quality and lower-priced imports continues. Up to the end of October, domestic production was down by 41% while imports are forecast to rise by 0.2% in 2018.

The Chinese continue to favor high-quality iron ore as they navigate new environmental restrictions and capacity restraints. And the highest quality of iron ore comes from Brazil, increasing ton miles. We are experiencing a strong Q4 program of Brazilian exports to China as demand is strong for high-quality iron ore, which causes less pollution and increased blast furnace efficiency. Lower coal shipments, ex Colombia and Australia, in the October-November period aided the weakness in Capesize vessels, but that looks likely to turn around in December. Logistical issues in the Australian iron ore exports have been corrected, and their shipment pace has returned to normal.

Please turn to Slide 14. The Chinese government continues to rationalize domestic coal production, closing down small inefficient mines and encouraging consolidation of large mining groups. It is expected that the restructuring of the Chinese coal industry will continue to keep domestic coal prices high and encourage imports as inefficient polluting mines are closed. Chinese electricity production continues to increase and is up 7% year-to-date, pushing up coal consumption in Chinese power production.

Through October 2018, Chinese seaborne coal imports were up about 11%. During the peak hydro period, coal stocks of major power plants have risen as daily coal consumption folds. Chinese coal stocks are now at levels where the Chinese government are trying to limit imports to support their own domestic coal industry. A similar situation occurred last year, and yet, the Chinese power utilities needed increased coal imports to manage the peak winter months. Indian coal imports also continued to build as coal stocks at power plants in India remain at uncomfortably low levels. U.S. coal exports have increased over 25% so far year-to-date, driven by Indian and Asian demand, increasing ton miles.

Turning to Slide 15. Agricultural production worldwide continues to increase. After a strong 6.2% growth in 2017, forecast for 2018 are for further increase. Worldwide grain trade has grown by 5.9% CAGR since 2018, mainly driven by Asian demand. Demand increases are focused on Asian economies, and especially China, where incomes are rising and diets are changing. Most of the increases in grain production are based in the Americas or European regions, increasing ton miles for longer trips to Asia. A drought in Australia will limit Australian weak exports, increasing ton miles as additional wheat gets sourced from further fields.

Chinese tariffs on U.S. soybeans have reduced U.S. exports in the 2018 to '19 crop year. However, corn exports have increased, and currently, 2018 year-to-date, the USDA showing grain inspections for exports are up overall versus 2017. Additional soybeans for China have been sourced from South America, and the new crop in South America looks likely to be a record high. Forecasts are expecting an early South American harvest in 2019, giving a boost to shipments from January-February onwards. The trade agreement at the G20 Summit is expected to release USA beans into China.

Moving to Slide 16. In spite of a significantly better market this year, the nondelivery rate is about 20%. Forecasts are for 2.8% net fleet growth in 2018, the fourth year of low net fleet growth. Based on the current order book and shipyard availability, low net fleet growth is expected to continue over the next few years. The total order book remains about 10% of the total fleet, resulting in low deliveries of new buildings for 2019 and 2020.

Increased regulations for Ballast Water Treatment Systems and IMO 2020 fuel regulations may accelerate scrapping of older vessels. It is worth noting that with the new IMO 2020 regulation starting January 1, 2020, many ships, which are retrofitting scrubbers, will face increased dry dock and installation time. It's in forecast that it could be as much as 40 days for a vessel without a regular dry dock scheduled and additional 10 days if scrubber fitting is being done during a scheduled dry dock. If that off-hire time is added to the time forecast to clean tanks from a heavy sulfur fuel to low sulfur fuel, then supply of tonnage will be restricted during 2019 and particularly, in the second half.

Turning to Slide 17. Net fleet growth so far this year is a low 2.5%. The number of actual vessels delivered in 2018 is about 34% less than 2017 year-to-date. The current dry bulk order book before nondeliveries is about 10% of the total fleet, and we note that vessels over 20 years of age equal about 7%. Given forecasted trade and ton mile growth, there is a balance between new expected deliveries and potential scrap candidates. The fundamentals for the balance of 2018 and beyond remain positive.

I would now like to turn the call over to our CFO, George Achniotis, for the Q3 financial results. George?

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George Achniotis, Navios Maritime Holdings Inc. - CFO [4]

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Thank you, Tom. Please turn to Slide 18 for a review of the Navios Holdings' financial highlights for Q3 and the 9 months through September 30, 2018.

The improvement in the dry bulk market is reflected in our Q3 results. Adjusted net income has turned positive, and adjusted EBITDA has doubled compared to last year. As tanker market also improves, going forward, we expect to see a positive contribution from our investment in NNA.

Adjusted EBITDA for the quarter increased by 101% to $62.8 million compared to $31.2 million in 2017. EBITDA for the third quarter was adjusted to exclude a $2.8 million impairment on the sale of Navios Mars and Navios Sphera. The increase in EBITDA is mainly attributable to 50% increase in the time charter rate achieved during the quarter compared to last year and a 32% increase in the EBITDA of Navios South American Logistics, primarily due to the iron ore terminal.

EBITDA for the quarter also includes a $6.5 million gain from the repurchase of our bonds. Adjusted net income for the quarter was $944,000 compared to a net loss of $28.3 million in 2017. The increase is mainly due to the increase in EBITDA.

Turning to the 9 months results. Adjusted EBITDA increased by 68% to $134 million from $80 million in 2017. 2018 EBITDA and net income were adjusted to exclude $16.1 million impairment loss from the sale of 4 vessels during the year. 2017 EBITDA was also adjusted for a number of one-off events. Similar to the quarterly results, the increase in EBITDA was mainly attributable to the 40% increase in the time charter equivalent rate achieved in the period compared to last year and an increase in the EBITDA of Navios South American Logistics.

Adjusted net loss for the first 9 months of 2018 improved by 46% to $52 million compared to an adjusted net loss of $95 million in '17. The improvement was mainly due to the increase in EBITDA. I would like to point out that the entire 2018 loss was generated in the first 6 months of the year.

Please turn now to Slide 19. We continue to maintain a healthy cash balance. At September 30, 2018, we had $143 million in cash compared to $134 million at December 31, 2017. Following the repurchase of part of our bonds and the repayment of bank debt, total debt reduced by about $83 million from $1.68 billion at year-end to $1.6 billion at the end of the quarter. I would like to point out that we have no significant debt maturities until 2022.

Over the next slides, I will briefly review our subsidiaries. Please turn to Slide 20. Navios Holdings owns about 21% of Navios Partners, including a 2% GP interest. Navios Partners owns a fleet of 40 vessels, 35 dry bulk and 5 containers. NMM also owns about 36% of Navios Containers, a growth vehicle dedicated to containers. Navios Partners announced a special distribution of approximately 25% of the outstanding equity of Navios Containers to the unitholders of Navios Partners.

NMM is a unique platform expected to generate significant cash flow with no significant near-term debt maturities. The company is currently in the process of deleveraging while renewing and expanding its dry bulk fleet. We received about $2 million in cash dividends from NMM during 2018. And since 2008, we received about $196 million in dividends.

Turning to Slide 21. Navios Holdings owns about 48% of Navios Acquisition. Navios Acquisition has a fleet of 37 modern, high-quality tankers, with an average age of 7.3 years, diversified between crude, product and chemical tankers. As previously announced, NNA is in the process of completing the acquisition of Navios Midstream Partners. On November 14, the registration statement was declared effective by the SEC. Election documents were sent to the NAP shareholders who must elect to exchange their NAP shares to NNA common or preferred shares.

The acquisition is expected to be completed before the end of the year. When the acquisition is completed, the combined entity will have a fleet of 43 vessels, including 15 VLCCs. We expect to receive about $6 million in dividends from NNA during 2018. And since 2011, we received about $87 million in dividends.

Moving to Slide 22. Navios Holdings owns about 3% of Navios Containers. Navios Containers is a company that was set up in June 2017 with the intention of taking advantage of opportunities in the container sector. Since its inception, the company raised about $180 million at the Oslo OTC market and acquired 26 vessels, mostly through distressed transactions. Navios Maritime Containers is expected to commence trading on the NASDAQ Global Select Market on or about December 10.

Now we will turn the call over to Ioannis Karyotis for his review of the Navios South American 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 23 provides an overview of the Navios Logistics business. Navios Logistics operates 3 port terminals. These are complemented by our barge fleet for river transportation and product tanker fleet for coastal cabotage trade.

Before reviewing the financial results for the third quarter, I would like to update you on the repair of iron ore port equipment damaged by fire back in August. The repair work has been completed, and the iron ore terminal is now fully operational. While the repair works were ongoing, we serviced all the cargo that Vale nominated, using the loading facilities of our radiation grain terminal. I will have already communicated we maintained property and loss of earnings insurance coverage for such type of events, and we do not expect any material impact on our financial performance.

Please turn to Page 24. For the overall results over the third quarter of 2018, revenue decreased 6% year-on-year to $55.9 million and EBITDA increased 41% to $25.5 million from $18.2 million in the same period last year. Q3 2018 port segment revenue increased 8% compared to the same period last year, and EBITDA increased 53% to $15.4 million.

The increase was attributable to the operation of the iron ore terminal. In Q3 2018, the iron ore terminal generated approximately $10.8 million EBITDA. The grain terminal had a weaker performance compared to Q3 2017, as grain export and transshipment volumes continued to be impacted by the drought in Uruguay and Argentina. According to USDA, Uruguay soybean crop was 59% lower and Argentinian crop was 31% lower compared to the previous year. On a positive note, USDA estimates that both the Uruguayan and Argentinian soybean crops will increase by 88% and 47%, respectively, in 2019 compared to 2018.

In the barge segment, Q3 2018 EBITDA increased 38% compared to the same period in 2017, mainly due to reduced operating expenses. Cabotage business Q3 2018 EBITDA decreased 14% to $5.2 million compared to $4.5 million in the same period last year. EBITDA has been positively affected by approximately $0.7 million compensation by the shipyard for delayed delivery of the new building river and estuary tanker that was delivered during the third quarter and started servicing a 5-year contract with YPF in October 2018. We're expecting to generate approximately $3.5 million annual EBITDA from this contract.

Net income increased 265% to $6.7 million from $1.8 million in the same period last year. The increase was attributable to the improved operating performance, partially mitigated by higher interest expense and finance cost net, mainly due to the new Term Loan B issued in Q4 2017.

Turning to the financial results for the 9-month period ending September 30, 2018. Revenue increased 3%, EBITDA increased 36% to $64.8 million and net income increased 196% to $9.7 million from $3.3 million in the same period last year.

Please turn to Slide 25. Navios Logistics has a strong balance sheet. Cash at the end of Q3 2018 was $82.5 million compared to $79.9 million at the end of 2017. Net debt to book capitalization was 55% compared to 56% at year-end 2017.

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 completes the 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) Our 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 wanted to start with the debt repurchases. Remind me, the vessels you sold during the quarter, what was associated with that? And what was opportunistic buybacks or prepayments? How do you kind of think about retiring the 2020 -- sorry. Go ahead.

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Angeliki N. Frangou, Navios Maritime Holdings Inc. - Chairman & CEO [3]

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Yes. Opportunistic buybacks, you can see it on Page 5 of our presentation. It's about almost $36 million, $35.7 million. And this is good for -- it's opportunistic to -- it's good for our P&L. You have a saving of about $4.5 million in interest. Plus, you are reducing your -- you get the benefit from the price.

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Noah Robert Parquette, JP Morgan Chase & Co, Research Division - Senior US Equity Research Analyst [4]

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Okay. And would it be safe to say that, that could become the focus of future cash flow use going forward given the discount and your leverage?

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Angeliki N. Frangou, Navios Maritime Holdings Inc. - Chairman & CEO [5]

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As we said, we buy from time to time opportunistically.

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Noah Robert Parquette, JP Morgan Chase & Co, Research Division - Senior US Equity Research Analyst [6]

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Okay. And then I wanted to ask, you've made some simplifying moves in the tanker side bringing in NAP at NNA. You're developing a container box. You still have an overlap on dry bulk in NMM and NM. So can you just kind of update us on your thinking there, if there's any plans? Or how you view that dry bulk exposure?

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Angeliki N. Frangou, Navios Maritime Holdings Inc. - Chairman & CEO [7]

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NM is a bigger company. You have different silos. You get stakes of every company. And yes, we spend time and have worked on simplifying NNA and NAP. And that, I think, it goes also -- happened to be also in a good time of the VLCC market. We did a lot of work on bringing Navios Containers and trying to bring the Navios Containers to the U.S. NASDAQ, and we'll have an improvement of credit ratios. But in reality, NM has also Navios Logistics, and we're creating a lot of value. You may have some drop downs from time to time, which we were doing, and this may be an eventual way of clearing the portfolio, but it's in the very early stage. You still have 70 vessels on Navios Holdings. So it's a large portfolio.

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Noah Robert Parquette, JP Morgan Chase & Co, Research Division - Senior US Equity Research Analyst [8]

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Okay. And then I guess, lastly, on the logistics. How much iron ore was serviced to the terminal versus the minimum? And maybe how are you guys progressing or what is your view on potentially fixing up the remaining capacity of that port?

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Angeliki N. Frangou, Navios Maritime Holdings Inc. - Chairman & CEO [9]

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One thing that I'd like to give before Ioannis will be answering the question, I just want to remind you we had the fire on that conveyor belt, which is now fully -- was just completed, the repair. So you have to have in mind this event.

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Ioannis Karyotis, Navios Maritime Holdings Inc. - SVP of Strategic Planning [10]

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The value is continuing to move less than the minimum guaranteed quantity. And in the third quarter, they moved about 115,000 tons. Of course, so far, they're servicing their minimum guaranteed requirements. And we have to see how that production will move in the coming quarters.

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Noah Robert Parquette, JP Morgan Chase & Co, Research Division - Senior US Equity Research Analyst [11]

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Okay. And then just one last one on system dry bulk. What is your view on what has happened with Capesize rates the last couple of weeks? How important has been the train derailment in Australia? And how much is maybe sentiment or more fundamentals driven?

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Thomas Beney, Navios Maritime Holdings Inc. - SVP of Commercial Affairs - Navios Corporation [12]

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I think there is some temporary weakness, obviously, on the spot market in Capes. So I think we saw sort of a culmination of events, a number of different factors. We started off with a little bit of less coal in Columbia and Australia. We had an event where a number of the volume excess all clubbed together for arrival period in Brazil. Even when we know the Brazilian program was going to be very strong, that took some Cape demand out of the market. Congestion has been reducing in Chinese discharge ports, et cetera. And then on top of that, you get a lot of negative sentiment, which is driven by media, tariffs, trade wars and Chinese coal import restriction, by the way, which we saw last year, and yet, they imported more over the winter period. So there's a lot of negativeness in the Capesize market at the moment. However, the fundamentals remain very strong. If you go forward into 2019, we know that demand growth is going to be good. Supply is very limited. And we're moving into the sort of disruption year prior to the 2020 IMO regulations coming into place, which is going to cause some restriction in tonnage supply. So we see the fundamentals overall from a macro perspective of good, and we have this sort of temporary blip in the Capesize market.

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Operator [13]

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Our next question comes from the line of [David Cohen] of [Cohen Partners].

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Unidentified Analyst, [14]

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Turning to Slide 13, the iron ore slide. It shows domestic production in China down 41%, seaborne import is also down, but steel production up 9%. What's to account for the increased steel production and reduced use of iron ore?

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Thomas Beney, Navios Maritime Holdings Inc. - SVP of Commercial Affairs - Navios Corporation [15]

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Yes. I think that's a good point. I think at the end of the day, what's happening is that you are continuing to import good quality iron ore. It tends to be coming more and more from Brazil where you get the best quality ore available. Production is up in China around 9% year-to-date of steel. But what's happening is they're eating some of their stocks, whether it's -- we've seen a 20 million reduction in the port stocks in the last 1.5 months, 2 months. And we're also seeing a little bit more scrapping used in the blast furnace process. So the substitution of domestic ore continues. I mean, domestic ore is down 40% this year. That's a huge drop. And that's supporting imports.

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Unidentified Analyst, [16]

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Okay. So their inventory are also below average? And so that's a temporary factor? They may have to import more pretty soon?

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Thomas Beney, Navios Maritime Holdings Inc. - SVP of Commercial Affairs - Navios Corporation [17]

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Yes. I think longer term, we can see imports being solid -- solidly supported for high-quality ore. But they're just eating some of their inventory in the ports.

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Unidentified Analyst, [18]

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Okay. The other question I have is regarding the port. Stock prices against all your securities to being so low. What are the relative basis are there? Any other plans for buybacks in any of the companies or a reverse stock split for Navios?

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Thomas Beney, Navios Maritime Holdings Inc. - SVP of Commercial Affairs - Navios Corporation [19]

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Yes. I have to apologize. We're unable to hear you. There's a very, very bad line. So maybe we should take it off-line and set up a call.

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Operator [20]

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And ladies and gentlemen, I'd like to turn the floor back over to Ms. Angeliki Frangou for any additional or closing remarks.

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Angeliki N. Frangou, Navios Maritime Holdings Inc. - Chairman & CEO [21]

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Thank you. This completes our Q3 results.

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Operator [22]

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Thank you, ladies and gentlemen. This does conclude today's call. You may now disconnect.