Navios Maritime Partners - Earnings Call - Q4 2021

Transcript

Speaker 0

Thank you for joining us for Navios Maritime Partners Fourth Quarter and Full Year twenty twenty one Earnings Conference Call. With us today from the company are Chairwoman and CEO, Ms. Angeliki Frango Chief Operating Officer, Mr. Stratos DeSepri Chief Financial Officer, Ms. Eri Cironi and Executive Vice President of Business Development, Mr.

George Agniotis. As a reminder, this conference call is being webcast. To access the webcast, please go to the Investors section of Navios Partners' website at www.naviosmlp.com. You'll see the webcasting link in the middle of the page and a copy of the presentation referenced in today's earnings conference call will also be found there. Now I will 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 Partners. Forward looking statements are statements that are not historical facts. Such forward looking statements are based upon the current beliefs and expectations of Navios Partners management and are subject to risks and uncertainties which could cause actual results to differ materially from the forward looking statements. Such risks are more fully discussed in Navios Partners filings with the Securities and Exchange Commission. The information set forth herein should be understood in light of such risks.

Navios Partners does not assume any obligation to update the information contained in this conference call. The agenda for today's call is as follows. First, Ms. Rango will offer opening remarks. Next, Mr.

DeCipres will provide a Navios Partners operational and fleet update overview. Next, Ms. Cerrone will give an overview of Navios Partners' financial results. Then Mr. Agniotis will provide an industry overview.

And lastly, we'll open the call to take questions. Now I turn the call over to Navios Partners Chairwoman and CEO, Ms. Angeliki Frengo. Angeliki?

Speaker 1

Thank you, Daniela, good morning to all of you joining us on today's call. I am pleased with our outstanding results for the fourth quarter and full year of 2021. During Q4, Navios Partners recorded revenue of $268,100,000 adjusted EBITDA of $156,600,000 adjusted net income of $121,800,000 And for the full year of 2021, Navios Partners recorded revenue of $713,200,000 adjusted EBITDA of $426,500,000 and adjusted net income of $364,100,000 Please turn to Slide three. In 2021, we reimagined what a public shipping company could be like and took actions to make this a reality. Today, Navios Partners is not only one of the leading U.

S. Publicly listed companies based on the number of vessels, but is also diversified across 15 vessel types in three segments servicing more than 10 end markets. About one third of our fleet operates in each drybulk, containership and tanker segments. We will discuss why we believe that this new structure offers a stronger, more resilient entity. Slide four presents some recent segment data.

Navios Partners fleet of 146 vessels has an average age of nine point six years and a loan to value of 32.5%. We have built $2,700,000 in contracted revenue, of which $2,200,000,000 is from the container sector. Of approximately forty seven thousand available days, almost half are exposed to market rates. This provided upside through recovering charter rates in the drybulk and tanker markets, which we expect in the near term. Slide five summarizes the basic principles behind the strength of our diversified platform.

Number one, a diversified platform allow us to optimize our chartering strategy. Fundamentally, this means that we can consider long term charters in segments that offer attractive returns while allowing vessels in underperforming segments to be chartered for short term or at index rate. Diversification allows the luxury of managing our chartering policy to our benefit without any balance sheet compulsion. Number two, the segments have some counter cyclicality building. This creates the opportunity of redeploying the strong cash flow from performing segments into asset purchases in underperforming segments where we believe attractive acquisition opportunities exist.

Ultimately, we believe that this allows for optimal capital allocation. Number three, asset values themselves can be volatile. We have seen a significant appreciation in the container sector recently and have lived through significant depreciation of asset values in the past. We expect this will continue. Leverage rates can remain low only if asset values cooperate and we believe that by diversifying our asset base, the balance sheet impact of asset value volatility will be muted.

Consequently, our balance sheet strength will be generating the impact from this diversity of assets. Together, this diversification creates a resiliency in the overall business model. Each segment works independently to mitigate volatility from the other segments. While we don't expect this to work perfectly, we think that it will reduce volatility sufficiently to allow us Latitude to leverage market opportunity because the overall structure is inherently more stable. We will have flexibility in our operational and financial activities and decision making process as we charter, sell and purchase vessels and obtain debt finance within this context.

We believe that the net result is that we should have more predictable entity level returns. On Slide six, we drill down into how we optimize our chartering. As you can see from the chart on the top right, the container segment is enjoying historically high charter rate. Operating in this backdrop, we have opted to fix our container fleet on long term charters with almost 100% of our available containership days fixed for 2022. This reduces market and residual risk for these vessels.

We manage the credit risk of our long term charters independently to ensure that we are not simply trading one risk for another. In our drybulk segments, we benefit from a market where rates are recovering to their historical twenty year averages. We have fixed only 24% of our available drybulk fleet days for 2022 and have opted to keep 76% of our twenty twenty two available days exposed to market rates to capture any available upside. Our chartering strategy also allow us to fix our drybulk fleet on long term charters when rates do improve. Lastly, within tankers, current charter rates are 80% below their twenty year average level.

We have 46.8% of our twenty twenty two available tanker days fixed, many with favorable legacy charters. We anticipate running this fleet on market rates until we see some healthier rates that will allow us to consider other options. We expect our tanker fleet will generate strong returns once the market recovers. It can help but to observe that we will have the luxury of patiently awaiting for this recovery given the strength of our other segments. Slide seven details our approach to capturing the unique opportunity of each segment.

Made $1,000,000,000 investment in 18 newbuilding vessels that will deliver to our fleet through 2024. Of this acquisition, we used the gathering strength of the container market to acquire 10 container ships. We hedge our financial investments by entering into long term credit worth charters for these vessels. We also engaged in the routine and continuous management of our fleet age profile in the drybulk and target space. Seven drybulk vessels and one VLCC were acquired at prices below their long term averages.

In our containership segment, we renew our fleet by acquiring ten five thousand three hundred TEU building containerships for approximately $620,000,000 The current market value of these vessels is estimated at $720,000,000 These 10 containerships will earn about $710,000,000 in contracted revenue for the five point two years duration of the related charters. We also capitalized on the strength in containership values by selling two sixteen year old vessels for $220,000,000 The sale was executed at historically high values and is expected to be completed in the second half of twenty twenty two. Moving on to our drybulk segment, field expansion was executed at attractive prices. As you can see, Navios Partners $332,000,000 investment in seven newbuilding vessels ordered when vessel values were challenged in the first half of twenty twenty one is worth approximately $372,000,000 today. Lastly, for the tanker segment, we are seeing a dichotomy in asset values versus charter rates, whereby values anticipate a recovering charter rate market.

In fact, our newbuilding VLCC vessel has already appreciated 36%. Slide eight lays out how Navios Partners intends to counter volatility existing in specific segments. Navios Partners' diversified asset portfolio provides balance sheet stability from the idiosyncrasies of specific sectors. As you can see from the chart on the slide, Navios Partners fleet in aggregate is currently valued at approximately $5,200,000,000 while containership values are at a historical high, drybulk vessels values are only 25% of their all time highs and tanker values are about 40% of their all time highs. This variation in asset values balances out through our diversified segment results in a 32.5% loan to value for Navios Partners on 12/31/2021.

As you can also see from the chart to the bottom left, NMM has about $3,500,000,000 in net equity value in these vessels. Slide nine reviews our recent developments. During the fourth quarter, Navios Partners generated $268,100,000 in revenue, dollars 156,600,000.0 in adjusted EBITDA and $121,800,000 in adjusted net income. For the full year of 2021, Navios Partners generated $713,200,000 in revenue, 426,500,000.0 in adjusted EBITDA and $364,100,000 in adjusted net income. The P and L is healthy and Navios Partners balance sheet remains strong.

As of 12/31/2021, we have about 170,000,000 in cash. The size of our balance sheet cash has a number of considerations including capital commitment for new vessels and working capital for the fleet. Consequently, I will expect that we will hold considerably more than our current cash balance. Considering only working capital for our fleet size, we estimate an approximate cash balance would be about about $2,000,000 per vessel. Leverage is 32.5% LTV as of 12/31/2021 and we have a staggered debt maturity profile.

As an update to our S and P activity since the fourth quarter of twenty twenty one, we agreed to acquire 5,300 TEU newbuilding container ships with the deliveries expected in 2024 for $251,300,000 to share two sixteen year old container ships for $20.20 dollars $220,000,000 with a closing expected in the second half of twenty twenty two. An update to our chartering activity, we secured new long term charters for 11 of our containerships that we expect to generate $670,000,000 in revenue as follows: about $290,000,000 through the four five thousand three hundred TEU newbuilding container ships, charter out for an average period of five point three years at an average net rate of $37,282 per day and about $380,000,000 through seven two thousand seven hundred and fifty to 4,250 TEU contain ships, chartered out for an average period of three point three years and an average net rate of $45,927 per day. We continue to take advantage of robust market. Navios Partners has $2,700,000,000 in contracted revenue. For 2022, our contracted revenue already exceeds forecasted expenses by almost $50,000,000 Moreover, out of our forty six thousand nine hundred and five available days, twenty one thousand nine hundred and sixty six of these days are exposed to market rate allowing for significant potential cash flow generation.

At this point, I would like to turn the call over to Mr. Stratos Decibres, who will take you through the next few slides. Stratos?

Speaker 2

Thank you, Ilya, and good morning all. Navios Partners is differentiated by its industry leading scale and diversified sector exposure. Slide 10 details our strong operating free cash flow potential. Currently, have contracted 53.2% over about forty seven thousand available days at an average rate of $20,957 net per day. For 2022, our contracted revenue exceeds total cash expenses by almost $50,000,000 and we still have about twenty two thousand days with market exposure that can provide additional operating cash.

The majority of our market exposure comes from our drybulk vessels where we have fixed approximately 24% of our available days. In Slide 11, you can see our fleet profile. 2021 was a transformational year for Navios Partners. Our fleet increased by 170% by entering two new segments and expanding our presence in the segments we were already operating. More specifically, we increased our drybulk fleet capacity by 36% and our containerships by 370%.

Additionally, we entered into the tanker segment by acquiring a 45 vessel tanker fleet. We have also been very active in renewing our fleet and reducing its average age. Since 2020, we have reduced the average age of our dry bulk fleet by 18% and of our containerships by 31%. The renewal process is a constant balancing effort. We like to be proactive and capture cyclical opportunities while allocating capital.

As you can see at the bottom of the slide, we have 21 vessels that are over 15 years of age, while at the same time, we have 18 new building vessels to be delivered from the third quarter of twenty twenty two through 2024. Turning to Slide 12, you can see some recent updates. We continue to secure long term employment for our containerships and we have fixed 11 vessels creating approximately $670,000,000 in contracted revenue. More specifically, we have contracted four newbuilding container ships delivering in 2024 for over five years at an average rate of 37,282 net per day, generating about $290,000,000 of contracted revenue. These vessels were acquired for an aggregate purchase price of $251,300,000 We have also chartered out seven containerships for periods between three and three point eight years, generating revenues of approximately $380,000,000 This chart represents a 2.8 times increase compared to the current contracted rates of these vessels.

On the S and P front, we capitalized on the strength of the containership values by selling two sixteen year old 8,200 TEU containerships $220,000,000 The sale was executed at historically high prices and is expected to be completed in the second half of twenty twenty two. We have also completed the sale of a 2,006 Panamax vessel for 14,000,000 We are constantly working on refinancing and extending maturities. We have completed our second sustainability linked financing, demonstrating our commitment to own ESG principles. Additionally, we are in advanced discussions for a new $55,000,000 facility for the refinancing of two existing facilities. In Slide 13, you can see the breakdown of our $2,700,000,000 contracted revenue.

About $1,200,000,000 or 45% of our contracted revenue will be earned in 2022 and 2023. 81% of our contracted revenue comes from our containerships with charters extending through 2030 with a diverse group of quality counterparts. I now pass the call to Eric Sironi, our CFO, who will take you through the financial

Speaker 3

highlights. Eric?

Speaker 4

Thank you, Stratos, and good morning all. I will briefly review our unaudited financial results for the fourth quarter and the full year ended 12/31/2021. The financial information is included in the press release and summarized in the slide presentation available on the company's website. Upon completion of the merger with Navios Maritime Containers, L. P, on 03/31/2021, and obtaining control over Navios Maritime Acquisition Corporation on 08/25/2021, the results of operation of these companies are included in Navios Partners' consolidated statement of operations.

On 10/15/2021, Navios Partners completed its merger with Navios Acquisition. I would like also to highlight that 2021 results are not comparable to 2020, as in 2021 N and M acquired two companies and increased its available days by 83% to thirty one thousand eight hundred and eighty four compared to 17430 for the previous year. Moving to the earnings highlights in Slide 14. Total revenue for the fourth quarter of twenty twenty one was $268,100,000 compared to $69,200,000 for the same period last year due to expansion of our fleet and the improved time charter equivalent rates for both containers and bulkers. The available days in Q4 twenty twenty one increased by 136.5% to eleven thousand sixty three days compared to four thousand eight hundred and five for the same period in 2020.

Our time charter equivalent rate increased by 64.1% to $23,005 per day compared to $14,021 per day for the same period in 2020. The average Q4 twenty twenty one time charter equivalent achieved by sector was bulkers $29,548 per day containers 23,765 per day and tankers $15,426 per day. EBITDA and net income for Q4 twenty twenty one include a 3,300,000 gain related to the sale of one vessel and a $7,600,000 of transaction relation to the NNA merger. Excluding these items, adjusted EBITDA increased by approximately $1,100,000 to $156,600,000 for the three month period ended 12/31/2021 compared to $35,500,000 for the same period in 2020. The increase in adjusted EBITDA was primarily due to a $198,900,000 increase in time charter and voyage revenues and a $11,100,000.0 increase in net loss attributable to non controlling interest.

The above increase was partially mitigated by a $47,500,000 increase in vessel operating expenses, a $13,900,000 increase in time charter and voyage expenses, an $8,500,000 increase in general and administrative expenses, a $6,300,000 increase in direct vessel expenses excluding the amortization of deferred drydock special survey cost and other capitalized items, a $2,200,000 increase in other income and a 500,000 decrease in equity, net earnings of affiliated companies. The above increases in expenses were mainly due to the expansion of our fleet. Total adjusted net income amounted to $121,800,000 compared to the three month period ended 12/31/2020. The increase in adjusted net income was primarily due to $121,100,000 increase in adjusted EBITDA and a $30,900,000 increase in amortization of the favorable lease terms. The above increase were partially mitigated by a 30,900,000 increase in depreciation and amortization expenses and $9,600,000 increase in interest expense and finance cost net, a $2,400,000 increase in amortization of deferred drydock special survey costs and other capitalized items and a $100,000 decrease in interest income.

Moving to the twelve months 2021 period, time charter revenue reached $713,200,000 compared to $226,800,000 in 2020. The result was a combination of the expansion of our fleet and the improved time charter equivalent rates. As mentioned earlier, available days increased by 83%, while our fleet time charter equivalent rate increased by 73.7% to $21,709 per day compared to $12,497 per day for the same period in 2020. The average twenty twenty one time charter equivalent rate achieved by sector was bulkers $23,331 per day, containers $22,435 per day and tankers 15,336 per day. Fleet utilization was approximately 99%.

EBITDA and net income in 2021 include an $80,800,000 gain in equity in net earnings of affiliated companies, a $48,000,000 bargain gain upon obtaining control over Navios Acquisition and upon completion of the NMCI merger, a $33,600,000 gain related to the sale of eight of our vessels and a $10,400,000 of transaction costs in relation to NMCI and NNA merger. Excluding these items, adjusted EBITDA increased by 326,700,000.0 to $426,500,000 in 2021 compared to $99,800,000 in 2020. The increase in adjusted EBITDA was primarily due to a $486,400,000 increase in time charter and voyage expenses and a $4,900,000 increase in net loss attributable to non controlling interest. The above increase was partially mitigated by $97,700,000 increase in vessel operating expenses, a $25,100,000 increase in time charter and voyage expenses, a $17,500,000 increase in general and administrative expenses, a $13,000,000 increase in direct vessel expenses excluding the amortization of deferred drydock special survey costs and other capitalized items, a $10,200,000 increase in other expenses net and a $100,000 decrease in equity in net earnings in affiliated companies. The above increases in expenses were mainly due to the expansion of our fleet.

Net income for 2021 exceeded $500,000,000 whereas on an adjusted basis, it reached $364,100,000 compared to $9,900,000 for the year ended 12/31/2020. The increase in adjusted net income was primarily due to a $126,700,000 increase in adjusted EBITDA and $108,500,000 increase in amortization of our favorable lease terms recorded in the year ended 12/31/2021 and a $300,000 increase in interest income. The above increase were partially mitigated by $56,700,000 increase in depreciation and amortization expense and $18,600,000 increase in interest expense and finance cost net and a $6,000,000 increase in amortization of deferred drydock special survey cost and other capitalized items. Turning to Slide 15, I will briefly discuss some key balance sheet data. As of 12/31/2021, cash and cash equivalents were $169,000,000 Long term borrowings, including the current portion, net of deferred fees amounted to $1,360,000,000 Net debt to book capitalization was at a comfortable level of 38%.

Slide 16 highlights our balance of strength. Our debt is 3.5 times covered by the value of our fleet based on publicly available valuations. Following the completion of the new $55,000,000 facility mentioned earlier, we would have minimal debt maturities in 2022, while our current maturity profile is staggered with no significant balloons due in any single year. Turning to Slide 17, you can see our ESG initiatives. Maritime shipping is the most environmentally friendly means of transportation as it is the most carbon efficient mode of transport.

We aspire to have zero emissions by 02/1950. In this process, we have been pioneering and are adopting certain environmental regulations up to three years in advance, aiming to be one of the first fleets to achieve full compliance. Navios is a socially conscious group whose core values include diversity, inclusion and safety. We have very strong corporate governance and a clear code of ethics. Our Board is composed by majority independent directors and independent committees that oversee our management and operations.

Slide 18 details our company highlights. Navios Partners is one of the largest U. S. Publicly listed companies shipping companies. Our diversification strategy creates resiliency and enables us to mitigate individual segment volatility.

Our diversification scale and financial strength should make NMM an attractive investment platform as we take advantage of global trade patterns. I now pass the call to George Achniotis, Executive Vice President of Business Development to discuss the industry section. George?

Speaker 3

Thank you, Eri. Please turn to Slide 20 for the review of the drybulk industry. The IMF projects global GDP growth at 4.4% for 2022, led by a 5.9% expansion in China, India and developing Asia. 2022 dry bulk trade is projected to increase by 2%. Similar to last year, most of the increase is expected to happen in the second half of the year.

Rates in all asset classes reached ten year highs in 2021, reflecting strong demand for bad commodities, aided by fleeting efficiencies due to the pandemic. The BDI peaked at $5,650 on October 7, the highest level since 02/2008. The market then retreated on the back of Chinese winter steel production limits and a surprising temporary ban on Indonesian coal exports. The BDI continued to retreat at the start of 2022, falling back below 1,500 for the first time in twelve months. However, recent efforts by the Chinese government to stimulate the economy and the expectation of increased steel production along with commencement of the South American grain export season should provide the market update.

Turning to Slide '21. Post pandemic stimulus measures in the advanced economies and increasing industrial production have fueled demand for the three major bulk cargoes, specifically seaborne iron ore trade is expected to increase by 1.2 in 2022 with second half twenty twenty two imports increasing 8.7% over the first half as reduced pollution restrictions allow an increase in Chinese steel production. Gas prices have exceeded coal pricing since August 2021 and the trend is expected to continue. In spite of stated goals of carbon neutrality, the gas price surge has driven power plants to switch back to coal fired power generation. Accordingly, seaborne coal imports are expected to grow by 2.4% in 2022 with the same seasonal pattern as iron ore in play.

The second half twenty twenty two coal demand is expected to grow by 8.2% over the first half. On the grain side, the global grain trade continues to be supported by an ever increasing world population, food security issues driven by the pandemic, as well as increasing protein demand worldwide. While grain production for the twenty twenty one-twenty twenty two crop year will reach a record according to the USDA. Global grain trade has been growing by about 5% CAGR since 02/2008, mainly driven by Asian demand. Please turn to Slide '22.

The current order book stands at 6.7% of the fleet, one of the lowest on record. Net fleet growth for 2022 is expected at only 2%. Vessels over 20 years of age are about 8.5% of the total fleet, which compares favorably with the historically low order book. In concluding our drybulk sector review, strong demand for natural resources combined with continuing COVID related logistical disruptions and a slowing pace of newbuilding deliveries all support healthier freight rates. Fleet growth is expected to decline further in 2023 as owners remove tonnage that will be uneconomic as the IMO 2023 CO2 rules come into force.

Please turn to Slide '24, focusing on the container industry. Demand for goods in The U. And Europe continued to rise in the latter part of 2021, increasing both container trade and supply chain bottlenecks. At the start of 2022, freight rates are at or near record levels, allowing us to log in long term contracts at historically high rates. As you can see in the blue box on the lower right, increases in demand for goods, port congestion and the restocking led to containership demand growth of 6.1% in 2021 with further growth of 3.8% expected in 2022.

Turning to Slide '25. Net fleet growth is expected to be 3.6% for 2022. Even with the increase in newbuilding orders, demand is forecast to outpace net fleet growth. It should be noted that about 72% of the order book is for for 13,000 TEU vessels or larger. In addition, 10.3% of the fleet is currently 20 years of age or older.

In conclusion, positive demand fundamentals mainly due to the change in consumer purchasing patterns and resulting supply chain bottlenecks along with reduced fleet availability should continue to support the containerized shipping industry in 2022. Please turn now to Slide 27 for the review of the tanker industry. Global oil consumption is recovering, although with modest growth due to the continued pandemic disruptions. However, OPEC plus continues to increase supply by 400,000 barrels per day on a monthly basis until midyear when all production cuts are eliminated. The IEA projects oil demand to exceed pre pandemic levels by Q3 twenty twenty two as recovery in the travel industry spares additional fuel consumption.

There is an approximate 90% correlation of world oil demand with global GDP growth and about two thirds of seaborne product trade is related to transportation. Turning to Slide '28. VLCC net fleet growth is projected at only 1.8% for 2022. This decline can be partially attributable to owners' hesitance to order expensive long live assets in light of macroeconomic uncertainty and engine technology concerns due to upcoming CO2 restrictions. The current order book is only 7.5% of the fleet.

Vessels over 20 years of age are 11.1% of the total fleet, which compares favorably with the low order book. Finally, turn to Slide '29. Product tanker net fleet growth is projected at only 0.6% for 2022. The current product tanker order book is 5.2% of the fleet, one of the lowest on record, and it compares favorably with the 7.8% of the fleet, which is 20 years of age or older. We believe that the overall tanker order book and fleet are well balanced as the IMO 2023 and ballast water management regulations will lead to some vessel retirements in the coming months.

In concluding, the tanker market continues to remain challenged in Q1. However, the combination of global oil demand returning to pre pandemic levels by midyear, OPEC plus increasing production, OECD inventories retreating below their five year average and the lowest order book in three decades should provide for healthy tanker earnings in the near term. This concludes my presentation. I would now like to turn the call over to Angeliki for her final comments. Angeliki?

Speaker 1

Thank you, George. This completes the formal presentation and we'll open the call to questions.

Speaker 5

We'll take our first question from Randy Giveans of Jefferies.

Speaker 6

Howdy team Navios, how's it going?

Speaker 1

Good morning. Good morning.

Speaker 6

Good morning. So you've been fairly active as both a buyer and a seller here in the container S and P market. How do you view your tanker and dry bulk fleets? How do you balance buying new assets and selling some of those older ones?

Speaker 1

Very good question. Randy, this is about this is also the first quarter that we did as a diversified diversified company. And what you have seen is that we are busy creating value. We took advantage of the container sector, buying newbuilding vessels, acquiring, hedging, creating cash flows that we will take total. The cash flows will bring zero residual value risk in having young assets and also creating five and seven year cash flows of over 2,200,000,000.0 That on if you look now on the drybulk, we have a very nice fleet and we are looking at the market that we cover.

So we have 75% on market exposure. Q1 is seasonally low, but we see that the market can be stronger the remaining of the year. So we can see returns if we have returns like last year, it can create very strong cash flows. And we have the luxury because of our contracted fleet in the container sector to really get the spot market because we have covered all our expenses and we have a $50,000,000 positive. So and really, the tanker on the other side is the big jewel that the kind of fleet we have.

We have seen that during NNA times, this kind of fleet can generate in good years over $200,000,000 of EBITDA. So that can be an additional swing. Of course, we can say that Omicron and the kind of event that happened post later the tanker recovery. And therefore, we have seen that now we are in a situation where we can enjoy both sectors and also the tanker is a jewel. So it's all about driving NAV, which will drive our stock price.

That is a big issue.

Speaker 6

Got it. All right. That makes sense. And now I guess the most important question, right? Your revenue backlog is massive, EBITDA is going to exceed, I don't know, 600,000,000, could be closer to $700,000,000 both this year and next.

However, your current distribution is about 1% of that, right, 6,000,000 on an annual basis. So when should we expect to see an increase to the distribution? And then secondly, as you mentioned NAV accretion, right, Your NAV is north of $60 probably closer to $80 However, your shares are trading at $30 So why not repurchase units at these levels?

Speaker 1

Listen, we are creating we are busy creating NAV. And unlike other companies, NAV, which is a product of the market, our NAV is the product of our activities. And you have seen us busy doing this from last year. And we have our stock price has been the best performing last year, not only on the stock price, but also if you take the total returns of peer. So this is an ongoing process and it's important to take advantage of the different segments.

What we did is take advantage of the container segment where we build cash flows. We bought vessels at attractive rate and we sold at historical. So we are not shy on that. So it's about creating the growth of our cash flows. And with that, we see our stock price to follow.

If we have sufficient working capital, as we have stated, and we have the investment CapEx, this is not about growth for growth. It's not about number of vessels. It's about a cash flow return. So if we cannot see attractive in this way, we of course, we will see in a follow in we will follow with a different strategy of buying back. So we have a fleet of 145 vessels, more or less.

You need a working capital of, let's say, 2,000,000 per vessel. We have our investment CapEx, which we have already you have seen in a lot of our slides. And also, we are seeing of how we create attractive cash flows and returns. You have seen it from our new buildings. You have seen how that translates to actual cash flows.

So this is what we are doing.

Speaker 6

Got it. All right. We are definitely looking forward to seeing that return of capital. But thanks again.

Speaker 1

Thank you.

Speaker 5

We'll take our next question from Omar Nokta of Clarkson Securities.

Speaker 7

Thank you. Hi guys. Good afternoon and good morning. Yes, thanks for the update today. I just wanted to ask about, you know, where you've been fairly active here recently on container side.

You know, first off, just I want to double check-in your last quarterly report, if I recall, you mentioned having taken your new building order book for the 5,300 TEUs to six ships and those were fully chartered. I just want to confirm that that order is now up to 10 ships as of today also fully contracted. Is that correct?

Speaker 1

Yes, Omar. And I remember in the last call, I was thinking that that will not be I was not thinking that it will be very possible to extend, but we managed to have we had options, we managed to exercise and we managed to totally hedge that position at even better and with zero residual with no residual value risk. So yes, we now have a 10 fleet, which gives us the ability to replace also our fleet, which is a very important issue on really looking a fleet of vessels that have an average age. And if you have seen, we have actually managed to reduce the average age versus the industry.

Speaker 7

Right. Yes, mean definitely a unique opportunity to order these vessels against long term charters that as you say basically remove the residual risk at the end of the contract. And just maybe generally in terms of where the market is today, you know, for further newbuildings and your appetite, you know, could you maybe just give us some color because, you know, liners last year were quite active, you know, securing long term charters against newbuildings, you know, for large and midsized ships. That seems to maybe have slowed recently but there really is now, you know, a big focus on chartering what's available again in the market today as, you know, you've highlighted here in your report today. Can you maybe give just some color on what you're seeing from this point on, on the new building front?

Are there still opportunities like the one that you've done here on the 5300s? Is there still an appetite for that? Are liners looking for that vessel class now in larger numbers? Or are they still kind of fixated on bigger size? Or is it kind of maybe just quieted overall?

Any color

Speaker 3

you can give on that front.

Speaker 1

Listen, I will never say never because as I learned last quarter, there can always be opportunities and there is different needs on their alignment. We have also seen that because they want vessels in the water as possible, we have seen this part of the things we have seen with aligners is this historic sale that we did. I mean, the $220,000,000 for the 16 year old vessels that we'll be delivering in the second half. So basically, the liners want to secure vessels as soon as possible. But and the alliances will play in different segments.

Other ones want to have ownership of the vessels. Others want charter. So different models depending on the liners. And there is a strength. Of course, at one point, we have to say that the pandemic will ease and at one point, you should have less of this kind of opportunities.

But it seems that it is going very strong. Just think about the value that we sold the two vessels was the market cap more than the market cap that we had last year in Q4 of in 2020 in the last quarter. So you see what kind of a powerful situation can be. But I think that the new buildings will be less of an issue right now. I think it's more vessels in the water.

Speaker 7

Okay. Thanks Angelique. And maybe just a follow-up and, you know, maybe just kind of speaks to, you know, the reimagined public shipping company, at least Navios' case with diversification strategy. You know, speaking of the 8,200 TEU ships that you've sold, you know, dollars $220,000,000, you know, that cash starts to come in the second half. How should we think about where that capital will be redeployed?

I know you touched on that in your opening comments and I think in response to Randy's question. But as you think about that capital and maybe future sales on the older side as you kind of replace with the new builds, where do you think right now you want to put that capital? Does that roll into tankers and taking advantage of a depressed environment there? Is that where you see the opportunity at the moment to invest excess cash?

Speaker 1

I think the issue is that the beauty of the diversification is that you can do it in every sector. This depends on the market opportunity. One thing I'll tell you is that, take for example, and I want to touch again on the new buildings on the container segment. We are not there to take a speculative on where the market is, we will not take a speculative order do a speculative order on vessels, because I think it's not prudent. I mean, have seen the where the container sector is, is in an all time high.

That will be an extremely risky business. Now the beauty is that we can always do dry bulk tankers, and it's purely about the opportunity. It's about where you can either secure or have the upside where it can give you four times the valuation or in the cash flows or the overall return. So this is what we like to do.

Speaker 7

Understood. Very clear. Thanks Angeliki. I'll turn it over.

Speaker 1

Thank you.

Speaker 5

We'll move next to Chris Wetherbee of Citigroup.

Speaker 8

Hey, thanks. Good morning. This is Eli Winski on for Chris. If we can just go back to the sales on the containership side. So 10.3% of the containerships are over 20 years old.

You guys just sold two of them, about 16 years old. Just curious if you guys have any more appetite for sales in containership. And then going off of that, if further sales there would help play into the strategy of fuel efficiency regulation?

Speaker 1

Listen, these vessels are not exiting the sector. What I will say is that Navios takes an opportunity on the segment and we have a strong performance on the segment. We will either sell a vessel or we charter it at a rate that will give us a better return. It's a decision we make with taking consideration cash flows and credit worthiness of the counterparty or sale. That's exactly what we are doing constantly.

And we care about is to cover positions that are further in the future. That is how we work our portfolio. So I mean, is and of course, what we are doing and this is you can see it on our new buildings, what we are doing, we are getting the younger generation fuel efficient vessels. So for us, this is a win win situation. If you are able to dispose of older vessels, less green to younger vessels, this is a win win situation.

And you are trying not to do it at any point and basically it's an ongoing process. If you look in our presentations, we have 18 new buildings while the vessels very close to the vessels that are So this is an ongoing process that we will be doing.

Speaker 8

That makes sense. And then I just need to ask about congestion. You guys talked about it at the top of the call, but just digging in, on the West Coast Of The U. S, we've seen ships move downwards off the coast. Ships in transit from Asia over seems to be relatively steady.

Do you think we could have reached an inflection downwards? Or is there something else that we're not thinking of right now on that side from Asia to The U. S?

Speaker 1

I think that Omicron can get these experts that will give you all the flows of vessels. And I think when Wall Street Journal, you have shipping being in the frontline of Wall Street Journal and congestion, it means it's to everyone's mind. And I'm sure there is a lot of information on that. I think the important issue that if we see in the macro level and we have to think about in January, we have an outbreak with Omicron that you had more sick people around the planet than from the period of the Spanish flu. So basically that delayed the whole process.

So we see that containers will continue to have a strong market and delayed the change into the consumption from services from products to services. That is definitely something that is playing right now, except of course of the geopolitical other issues that we see.

Speaker 8

That makes sense. Thank you, Angeliki. Thank you all.

Speaker 5

This does conclude our question I'd and answer session for be happy to return the call to Angeliki for any concluding remarks.

Speaker 1

Thank you. This completes our Q4 results. Thank you.

Speaker 5

This does conclude our conference for today. You may now disconnect your lines and everyone have a great day.