Business Context and Reporting Period
Company: Navios Maritime Partners L.P.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Date: December 7, 2022
Reporting Period: Unaudited results for the three and nine months ended September 30, 2022, compared to the same periods in 2021.
Overview: Navios Partners is an international owner and operator of dry cargo and tanker vessels. As of November 30, 2022, the fleet consisted of 87 drybulk vessels, 47 containerships, and 51 tanker vessels. The company operates under a single reportable segment and is managed by affiliated entities Navios Shipmanagement Inc. and Navios Tankers Management Inc.
Key Financial Metrics
| Metric ($ in thousands) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 |
|---|---|---|---|---|
| Time Charter & Voyage Revenues | $322,387 | $227,957 | $839,665 | $445,029 |
| Net Income | $257,164 | $158,195 | $460,989 | $394,787 |
| Net Income Attributable to Unitholders | $257,164 | $162,054 | $460,989 | $398,646 |
| EBITDA | $321,433 | $177,185 | $611,028 | $426,160 |
| Adjusted EBITDA | $177,669 | $145,234 | $467,264 | $269,828 |
| Operating Surplus | $94,790 | $104,693 | $240,859 | $183,059 |
| Net Cash Provided by Operating Activities | $219,108 | $70,904 | $366,271 | $148,153 |
| Time Charter Equivalent (TCE) Rate (per day) | $23,781 | $24,447 | $22,717 | $20,991 |
| Fleet Utilization | 99.1% | 99.2% | 98.9% | 99.1% |
| Total Borrowings (Gross) | $1,938,829 (as of Sep 30, 2022) |
Material Changes vs. Prior Period
- Revenue Growth: Nine-month revenues increased 88.7% to $839.7 million, driven by a 72.5% increase in available days (due to fleet expansion via the 36-vessel drybulk acquisition and mergers) and an 8.2% increase in TCE rates.
- Profitability: Net income for the nine months ended September 30, 2022, rose 16.8% to $461.0 million. This was significantly boosted by a $143.8 million gain on the sale of two containerships (Navios Unite and Navios Utmost).
- Expense Increases: Vessel operating expenses increased 90.5% year-over-year for the nine-month period, primarily due to the larger fleet size. Interest expense increased 81.2% due to higher average loan balances and rising interest rates (weighted average rate increased to 4.59% from 4.29%).
- One-Time Items: The 2021 period included a $48.0 million bargain gain and $80.8 million equity in net earnings from the acquisition of Navios Containers, which were not present in the 2022 period.
Guidance, Outlook, and Recent Developments
Fleet Transactions (Subsequent Events)
- Acquisitions: Agreed to acquire two 115,000 dwt Aframax/LR2 newbuilding vessels in November 2022 for $60.5 million each, with an option to charter them at $27,798 per day. Also agreed to acquire a newbuilding Capesize and a 2016-built Kamsarmax vessel for $91.3 million.
- Sales: Agreed to sell five older tanker vessels (Nave Cosmos, Nave Polaris, Star N, Nave Dorado, Perseus N) and two Panamax vessels (Navios Alegria, Navios Symmetry) with sales expected to complete in Q4 2022 or Q1 2023.
- Financing: Completed a $100 million sale and leaseback transaction for 12 containerships in October 2022. Entered a new $86.2 million credit facility in September 2022 for new containerships.
Risks and Contingencies
- Market Risks: Exposure to fluctuations in charter rates, global economic conditions, and the Russian/Ukrainian conflict. The company employs Ukrainian and Russian seafarers, creating potential operational risks.
- Liquidity: As of September 30, 2022, the company had a negative working capital position of $358.0 million. Management forecasts sufficient cash from contracted revenue ($3.4 billion as of Nov 25, 2022) and vessel sales to meet obligations for at least 12 months.
- Interest Rate Risk: Borrowings are tied to SOFR/LIBOR. A 1% increase in rates would have increased interest expense by $9.1 million for the nine months ended September 30, 2022.
Investor Verification Checklist
- Gain on Sale Sustainability: Verify the impact of the $143.8 million one-time gain on vessel sales on the reported net income and Adjusted EBITDA.
- Debt Maturity Profile: Review the maturity table showing $364.8 million in principal payments due in 2023 and $382.4 million in 2024 against projected cash flows.
- Charter Rate Exposure: Assess the mix of spot vs. long-term charters and the impact of de-escalating rates on future revenue stability.
- Related Party Transactions: Confirm the terms of management agreements and administrative fees paid to affiliated managers, which totaled $226.1 million in vessel operating expenses for the nine-month period.
- Working Capital: Monitor the negative working capital position and the reliance on vessel sales proceeds to maintain liquidity.