MarketWatch  Sep 14  Comment 
Navios Maritime Containers Inc. said late Thursday it has "ceased marketing" its previously announced proposed U.S. initial public offering on the Nasdaq Global Select Market. The provider of container services to the maritime industry said it is...
Benzinga  Sep 7  Comment 
For a more comprehensive IPO calendar, check out the offering in Benzinga Cloud. 111, Inc. (YI) will issue 9.3 million shares between $14 and $16 Wednesday on the New York Stock Exchange and Nasdaq. China’s online pharmacy recorded $184...


Navios Maritime Holdings Inc. (NYSE: NM) is a global seaborne shipping and logistics company focused on the transport and trans-shipment of dry bulk commodities such as iron ore, coal and grain.[1]

At the end of 2010[2] , the company's fleet (including vessels scheduled for delivery) of 57 vessels (excluding subsidiaries NMM, NNA, and NSAL) consisted of:

  • 21 Capesize vessels (12 owned, 9 chartered-in)
  • 19 Ultra handymax vessels (14 owned, 5 chartered-in)
  • 2 Handysize vessels (chartered-in)
  • 15 Panamax vessels (4 owned, 11 chartered-in)

Business Outline

The company reports results across three segments: Drybulk Vessel Operations (64% of 1H FY2011 revenue), Logistics Business (about 29% of 1H FY2011 revenue), and Tanker Vessel Operations (about 7% of 1H FY2011 revenue). The Drybulk Vessel Operations business consists of transportation and handling of bulk cargoes through ownership, operation and trading of vessels, freight and forward freight agreements. The Tanker Vessel Operations business consists of transportation and handling of liquid cargoes through ownership, operation, and trading of tanker vessels. The Logistics business consists of operating ports and transfer station terminals, handling of vessels, barges and push boats, as well as upriver transport facilities.[3]

The shipping industry is going through transition at a time when there is healthy underlying demand for mineral and grain commodities and crude oil globally. Navios has benefited from the continued demand for commodities from the urbanization of emerging markets.

Business Growth

Demand Recovery, Capacity Growth

Demand for drybulk commodity transportation is arguably driven by perceived economic growth (commodity producers anticipating where demand will materialize). Therefore, as the global macroeconomic picture improves following the 2008 recession, it seems reasonable to conclude that demand for drybulk transportation will also improve.

Drybulk commodity transportation is a capital-intensive business; ships are expensive and the payback period can be lengthy. Therefore, to increase capacity (either via purchase or charter), shipping companies need access to capital. Traditionally, banks have been the source for financing for European companies, but it could be argued that European banks' willingness and ability to lend was negatively impacted by the 2008 financial crisis. The company commented that its ability to secure financing through subsidiary NMM could be a competitive advantage if capital continues to be scarce for newbuild financing.

Another avenue for financing capacity expansion is cash on the balance sheet. The company's cash situation has been on an improving trend from 2009 - 2010.[4] The company reported 207.4 million dollars of unrestricted cash for FY 2010, vs. 173.9 million dollars in FY 2009 and 113.6 million dollars in FY 2008.


Aside from exposure to the dynamics of the drybulk commodity transportation market, Navios also has exposure to the South American logistics business through Navios South American Logistics (NSAL). The company plans to continue capital investments to expand terminals, add barges and increase market share. Although the company did not offer a capex schedule, it referenced grain, iron ore, and minerals as key areas for future projects. The main driver behind the expected growth was demand from China.

Financial Performance

Q3 2011 Results

Revenue increased +2.1% YoY to 173.8 million dollars.[5]

  • Drybulk revenue decreased 1.7% YoY to 105 million dollars, driven by a decrease in charter-in fleet available days (181 fewer days for short-term charters-in and 126 fewer days for long-term charters-in) and a 7% decrease in TCE. An 17.5% increase in available days for owned vessels (to 2,489 days) partially offset lower charters-in available days.[5]
  • Logistics revenue increased +24.4% YoY to 68.8 million dollars. Revenue growth was driven by increased capacity (new vessels San San H and Stavroula came into service in October 2010 and March 2011) and higher volumes of iron ore transportation.[5]

Gross profit (revenues less time charter, voyage, and port terminal expenses as well as direct vessel expenses) fell 2.8% YoY and gross profit margin fell to 41.7% vs 43.8% in Q3 FY 2010.[5]

Income Before Affiliates increased +75.2% YoY to 7.7 million dollars; a nearly 40% reduction in general and administrative expenses was the key factor in the YoY growth.[5]

Net income grew +11.3% YoY to 16.3 million dollars, and the net profit margin was 9.4% (vs. 8.6% in Q3 FY 2010). Although equity in net earnings of affiliated companies declined 17.7% YoY, performance at the parent company level (income before affiliates) drove net income growth.[5]

Fleet - 56 vessels (43 in operation), approximately 5.8 million dwt . Including expected deliveries, the fleet comprised 30 owned vessels and 26 chartered-in. The operating fleet average age was 5.0 years.[5]

Ultra Handymax - 16 (14 owned, 2 chartered-in)
Capesize - 16 (11 owned, 5 chartered-in)
Panamax - 10 (3 owned, 7 chartered-in)
Handysize - 1 (chartered-in)

Key Financial Data

Cash on the balance sheet was about 212 million dollars (including restricted cash). Cash levels decreased due to investing activities (related to PP&E and vessel acquisitions and deconsolidating Navios Acquisition).
The debt to equity ratio (current and long term debt / equity less non-controlling interests) was about 1.4x.

1H FY 2011 Results[6]

Revenue increased to 347.1 million dollars (+8.5% YoY).

  • Drybulk revenue decreased -3.9% YoY, contributing factors included fewer available days for short and long-term charters (-205 and -740, respectively), and a 5% decrease in TCE ($24,143 vs. $25,424). The decrease was partially offset by an 22.5% increase in available days for owned vessels.
  • Logistics revenue increased +12.9% YoY, driven by new vessels in service and demand for iron ore transportation.
  • Tanker Vessel Operations revenue was 25.1 million dollars, vs. revenues of below $0.1 million dollars in 1H FY2010.

Gross profit (revenues less time charter, voyage, and port terminal expenses as well as direct vessel expenses) was 159.7 million dollars (+22.9% YoY). Gross profit margin improved to 46.0% vs. 40.6% in 1H FY2010. Time charter, voyage, and port terminal expenses declined YoY due to lower fleet activity. Direct vessel expenses increased +59.5% YoY, mainly due to operating expenses for new vessels leased by Navios Logistics.

Income Before Affiliates was -0.6 million dollars vs. 57.8 million dollars in 1H FY2010. The decrease in income was related to deconsolidation of Navios Acquisition (accounting charge of 35 million dollars) and charges related to extinguishing debt (21 million dollars).

Net Income was 14.0 million dollars (-82.2% YoY). The decrease was due to change in control and bond extinguishment accounting charges.

Fleet - 56 vessels (43 in operation). Including expected deliveries, the fleet comprised 29 owned vessels and 27 chartered-in; average age of 5.0 years.

Ultra Handymax - 19 (14 owned, 5 chartered-in)
Capesize - 20 (11 owned, 9 chartered-in)
Panamax - 15 (4 owned, 11 chartered-in)
Handysize - 2 (chartered-in)

Key Financial Data

The company reported 342 million dollars of cash on the balance sheet.
The debt to equity ratio (current and long term debt / equity less non-controlling interests) declined to 1.4x (vs. 2.0x for FY 2010).

FY 2010 Results [7]

Revenue increased to 680.0 million dollars (+13.6% YoY).

  • Drybulk revenue was flat YoY (-0.30%), mainly a result of lower TCE in 2010 ($25,527) vs. 2009 ($25,821). Additionally, a decrease of available days for short and long term charters (-458 and -1,174 days, respectively), was offset by a +29.2% increase in ownership days YoY following delivery of owned vessels.
  • Logistics revenue increased +35.3% YoY. Revenue increased mainly due to vessel acquisition as well as new storage capacity impacting results.
  • Tanker Vessel Operations revenue was 33.6 million dollars, the company did not report results for the segment in 2009

Gross profit (revenues less time charter, voyage, and port terminal expenses as well as direct vessel expenses) was 296.3 million dollars (+38.8% YoY). Gross profit margin improved to 43.6% vs. 35.6% in FY2009. Although time charter, voyage, and logistics business expense declined YoY, direct vessel expenses increased due to an increase in ownership days following delivery of owned vessels.

Income Before Affiliates was 105.0 million dollars (+161.6% YoY). The increase was due to technical accounting details: a gains on sale of assets (55.4 million dollars) and a change in control gain (17.7 million dollars).

Net income was145.3 million dollars (+104.7% YoY), and net profit margin increased to 21.4% vs. 11.9% in 2009. The improvements in net income and margin were due largely to gains in Income Before Affiliates, however increases in earnings of affiliate companies also contributed.

Fleet - 57 vessels (30 owned, 27 chartered-in), with an average age of 4.7 years. The company noted that it's average vessel age of 4.7 years was less than the industry average of over 20 years.

Ultra Handymax - 19 (14 owned, 5 chartered-in)
Capesize - 21 (12 owned, 9 chartered-in)
Panamax - 15 (4 owned, 11 chartered-in)
Handysize - 2 (chartered-in)

Business Segments

Drybulk Vessel Operations (64% of 1H FY2011 revenue)

As of 1H FY2011, the company's fleet comprised 56 vessels totaling 5.9 million dwt (including newbuild ships expected to be delivered), with an average age of 5.0 years. The company purchases vessels as well as secures long-term charters from vessel owners, but as of 1H FY2011, the fleet was mostly owned by Navios.[4]

The company typically tries to secure long-term charter-in and charter-out agreements with both its suppliers (vessel owners) and its customers. Additionally, Navios typically obtains insurance on the contracts with customers, thereby limiting non-payment risk from customers.[8]

Logistics Business (29% of 1H FY2011 revenue)

The company's Logistics Business is geographically focused on South America. The Logistics Business comprises three areas: Port Terminal Operations, Barge Business, and Cabotage Business.

  • Port Terminal operations include a bulk terminal (360,000 metric tons of storage) in Uruguay and a fuel terminal (35,600 cubic meters of storage) in Paraguay.
  • Barge Business include 295 barges and pushboats that are used to transport dry and liquid cargoes across river shipping lanes, as well as 1 floating dry dock.
  • Cabotage Business is geographically focused mostly on Argentina. The fleet includes 6 ocean-going product tankers and two barges.[8]

Tanker Vessel Operations (7% of 1H FY2011 revenue)

This segment was discontinued by the company on June 30, 2011 following the deconsolidation of Navios Acquisition. [8]

Business Model

Navios' core business is its Drybulk Vessel Operations segment. Revenues in this segment are a function of days that ships are available for hire and the contracted rate per day. Days available for hire is a function of the vessel's age as well as other factors (older vessels typically have higher maintenance and upgrade costs vs. newer vessels). The daily rate customers pay can be impacted by the length of the charter, the age of the vessel (newer vessels are typically more fuel efficient and can have lower operating costs), and other market conditions. The company takes an active approach to secure long-term agreements with customers to minimize the volatility of spot rates when management considers it appropriate.

The company indicated that typically it tries to secure 75% of revenues for the upcoming year, and 50% for the following year, and adjusts the mix of contracted vs. spot rates as the year progresses.

Insurance for Charter Contracts
The company claims that its ability to cover all of its charter contracts with insurance policies is a unique advantage not available to competitors. Following the acquisition of Kleimar N.V. in 2007,[9] the company received access to an insurance program for Belgian shippers. According to the company, it can insure contracts until the end of 2017 (if a 10-year contract is signed on the last day of the year, the contract is eligible for coverage).
How the insurance works: If a counterparty defaults on a payment, Navios is compensated for either the amounts lost (unpaid) or the difference between the previously contracted rate and the spot rate (if re-contracted out). The net result is that Navios has greatly reduced risk for its charter contracts compared to uninsured contracts.
Contracted Revenue [10]

Costs include commissions on charters, vessel operating expenses (crew, insurance, maintenance), and financing (or charter-in) expenses.

Therefore, profitability is driven by fleet utilization and securing the best rates possible.

Financing Needs

Navios' fleet is financed with a mix of bank loans and bonds. As of 1H FY2011, the company had total debt of approximately 1.5 billion dollars.[8]

The refinancing needs are shown below:

 Debt repayment schedule, from 1H FY2011 Earnings Presentation

Group Structure

The main companies in the Navios Group include the following (as of 1H FY2011):

  1. Parent company (Navios Holdings, NYSE:NM)
  2. Navios Maritime Partners (NYSE:NMM): 27.1% owned by the parent company. NMM’s core business (drybulk commodity transport) is similar to the parent’s, but its legal structure (MLP) seems to benefit both the company and its investors. MLPs are required to pay out a significant portion of earnings (NMM pays 100%) and don’t pay corporate income taxes, so an MLP offers higher yield and tax efficiency compared to a corporation. The company uses NMM’s lower cost of equity to raise capital and then sells vessels (with contracts attached) to NMM, realizing the full value of the steel and contract. NMM shareholders benefits by receiving the productive assets (new vessels with long term contracts) and a tax-advantaged dividend payout. Although NM and NMM could compete for new ships and transport contracts, it seems mutually beneficial not to do so.
  3. Navios Maritime Acquisition Corp. (NYSE:NNA): 53.7% owned by the parent company. NNA’s core business is owning and operating tanker vessels (focusing on transportation of clean and dirty petroleum products, and bulk liquid chemicals). NNA was initially created as a SPAC to take advantage of certain market opportunities, but was brought back on the company’s balance sheet in May 2010. The company “de-SPAC’d” NNA in order to expand its operations into the product tanker business (meeting demand from refiners in the Middle East, India, and China). The company de-consolidated NNA in FY2011 in an effort to improve the parent company’s credit quality.
  4. Navios South American Logistics (Unlisted): 63.8% owned by the parent company. NSAL operates ports and provides logistics services mainly in the Hidrovia region South America (a river system stretching through Brazil, Bolivia, Paraguay, Argentina, and Uruguay,[11] roughly the size and scale of the Mississippi river in the US). The company’s long-term plan for NSAL are to grow the business and sell it to the public through an IPO.

Key Trends and Forces

World Economic, Population, and Infrastructure Growth All Increase Demand for Dry Bulk Commodities

Economic growth causes demand for all ranges of inputs to increase. Population growth causes demand for food and electricity generation materials to increase. Infrastructure growth causes demand for steel and ore to increase. Increases in any of these causes increases in dry bulk trade. If there are more buyers (companies who need to move the materials) coming to the market, the sellers (companies like Navios who possess dry bulk vessels) can demand higher rates to move the necessary cargo.

Factors Affecting Dry Bulk Charter Rates

  • Commodity Demand - This is determined mainly by industrial production and energy demand. If commodity demand is strong, BDI Baltic Dry Index rates increase regardless of spot rates for those commodities. Companies that have contracted out spot rates show increased demand through paying more for shipping of the materials. As more coal and steel are being demanded by China, the rates for dry bulk shipping increase.
  • Ship Supply - The number of ships available to meet demand for commodity transport can also have an impact on rates; availability can be affected by:
  1. Scrapping - as vessels age and operating expenses increase, vessel owners can opt to scrap vessels (scrap values paid by recyclers can vary with commodity prices).
  2. Newbuilds - vessel operators can purchase new vessels from shipyards, however the delivery time can be impacted by shipyard backlogs, and financing options for the vessel operator.
  • Seasonal Pressures - Weather has a significant impact on both demand and logistics. For demand, cold weather increases the demand for coal and other energy creating raw materials. For logistics, cold weather frequently causes ice to block ports and low rivers to prevent travel. Both of these cause increases in the BDI. Conversely, a mild winter or early ice breakup in cold water parts cause decreased in the BDI.
  • Bunker Prices - Bunker oil is the name for the oil a ship uses for fuel. Bunker fuel accounts for between a quarter and a third of vessel operating costs. These higher oil prices are reflected in higher BDI prices. So just as higher oil prices put a damper on Airline company margins, they squeeze margins for dry bulk operators.
  • Choke Points Nearly half of the world's oil passes through a few narrow shipping lanes. This includes the straights of Hormuz and Malacca, the Bosporus and the Suez and Panama canals. These choke points cause natural caps in ship supply; i.e.- only a certain amount of ships can pass through them each day. If something disrupts this flow, the BDI increases.
  • Market Sentiment - Because of the time lag in forecasting demand for raw materials, market opinion can greatly affect the freight exchange. [12] The January 2008 halving of the index's value can be attributed to many companies forecasting lower global growth and cutting their production/demand targets.
  • Port Congestion -This acts as another great buffer against supply increases lowering index prices. The actual infrastructure of these ports prevents more ships entering the market. The ports simply cannot handle more traffic. Until changes occur at these vital terminals, there is upward pressure on dry bulk prices. Shipping industry analysts are actually developing an index to standardize and make available this incredibly vital data.


Most of Navios' competitors offer very similar services. However, all of them operate largely in specific regions and thus are dependent on both global and region-specific economy.


  1. Wikinvest SEC Files: 2010 20-F, Item 5: Operating and Financial Review and Prospects
  2. 2010 20-F, page 35: Business Overview
  3. 1H FY2011 filing
  4. 4.0 4.1 MarketWatch: Navios Maritime Holdings Inc. Reports Financial Results for the Fourth Quarter and Year Ended December 31, 2010
  5. 5.0 5.1 5.2 5.3 5.4 5.5 5.6 NM Q3 Earnings Release
  6. http://secfilings.nyse.com/download.php?format=PDF&ipage=7791907&cik= NM 1H FY 2011 results
  7. http://secfilings.nyse.com/download.php?format=PDF&ipage=7531054&cik= FY2010 20/F Annual Report
  8. 8.0 8.1 8.2 8.3 Navios Holdings Earnings Presentation
  9. http://www.reuters.com/article/2007/02/05/naviosmaritime-takeover-kleimar-idUSBNG14178920070205
  10. http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NDM5MzQyfENoaWxkSUQ9NDYwODE4fFR5cGU9MQ==&t=1 NM - Jefferies Conference Presentation
  11. http://www.navios-logistics.com/COMPANY_PROFILE NSAL Corporate profile
  12. Baltic Exchange Index
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