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Navios’ strengthening balance sheet and capex replacement policy

Khyathi Dalal

Overview: Navios Maritime Partners’ earnings (Part 7 of 12)

(Continued from Part 6)

Navios Partners’ strengthening balance sheet

In addition to strengthening the balance sheet through recent capital market activities, Navios Maritime Partners’ (or NMM) second quarter results also indicate that it’s ready to acquire two container vessels. The vessels and employment will be the company’s cash flow.

Total assets for the quarter increased to $1.3 billion from $1.2 billion—reflecting the increase in fleet size. Long-term debt, including the current portion, decreased by $2.7 million, mainly due to repayment during the quarter. Net debt-to-asset value on a charter-adjusted basis decreased to 33.1% at the end of the second quarter.

NMM also has a 50% debt financing. It will provide at least another $150 million of purchasing power for future acquisitions.

Capex replacement policy

The company follows its capex replacement policy. NMM has done this for all its vessels from day one. It has a replacement capex policy where NMM believes that replacing older vessels is less attractive than acquiring brand new vessels. Regardless of the age of the vessel that is bought, at the end of the day NMM seeks to replace it with another five year old vessel.

NMM calculates the replacement capex in a standard way. It has been done to all of the vessels in the fleet. For any vessel that’s added to the fleet, there’s always a five year old vessel. The company’s operating surplus and distributable cash flow always excludes this replacement capex. So, this portion is kept out of the distribution.

NMM’s policy is different from its peers—DryShips Inc. (DRYS), Diana Shipping Inc. (DSX), Navios Maritime Acquisition (NNA), and Navios Maritime Holdings Inc. (NM). NMM’s policy gives it a competitive advantage over its peers. It also strengthens its balance sheet and enhances cash flow. The Guggenheim Shipping ETF (SEA) tracks these shipping companies.

NMM also has a significant presence in the container business. We’ll discuss this in the next part of the series.

Continue to Part 8

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