Navios Maritime Partners L.P. — FY2022 Form 20-F
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone 2022 fourth-quarter filing; quarterly results are not clearly provided in the supplied text. Financial statements are prepared under U.S. GAAP.
Business context
Navios Partners owns and operates drybulk, containership and tanker vessels, generally under time charters. The 2022 fleet expansion included the acquisition from affiliate Navios Holdings of a 36-vessel drybulk fleet, delivered in July and September. The filing reports 162 vessels operating at year-end. Results for 2021 include Navios Containers and Navios Acquisition only from their respective consolidation dates, limiting direct year-over-year comparability.
Key financial metrics
| Metric | FY2022 | FY2021 |
|---|---|---|
| Time charter and voyage revenue | $1,210.5 million | $713.2 million |
| Net income attributable to unitholders | $579.2 million | $516.2 million |
| Basic earnings per common unit | $18.82 | $22.36 |
| Net cash provided by operating activities | $506.3 million | $277.2 million |
| Net cash used in investing activities | $316.2 million | $106.3 million |
| Net cash used in financing activities | $184.4 million | $32.2 million |
| Adjusted EBITDA | $667.9 million | $426.5 million |
| Operating surplus | $343.5 million | $293.7 million |
| Borrowings, net of deferred finance costs | $1,945.4 million | $1,361.7 million |
Revenue rose 69.7%, primarily from the expanded fleet and a 6.1% increase in daily time-charter-equivalent rate to $23,042. Fleet utilization was 98.9%, compared with 99.2% in 2021. Net income increased, but earnings per unit declined. The filing attributes the higher debt and interest expense to acquisitions and increased borrowing costs; net interest expense and finance costs rose to $83.1 million from $42.8 million, while the weighted-average borrowing rate increased to 5.33% from 4.14%.
Liquidity: Year-end cash and cash equivalents were $157.8 million, with another $17.3 million restricted. Current assets of $310.4 million were below current liabilities of $617.7 million, producing negative working capital of $307.3 million. Management forecast sufficient cash for at least 12 months after financial-statement issuance, citing contracted revenue of $3.5 billion as of March 13, 2023 and vessel-sale proceeds. The filing also reports $3.193 billion of future minimum contractual lease income as of December 31, 2022.
Cash distributions: The partnership paid $0.05 per unit per quarter, or $0.20 for 2022. The board retains discretion over distributions, which are subject to debt covenants and cash needs. A $100 million unit repurchase program was authorized in July 2022; no units had been repurchased by year-end.
Material changes and unusual items
- Revenue increased by $497.3 million year over year, largely reflecting acquisitions and the larger fleet. Available fleet days rose 56.2% to 49,804.
- The 36-vessel drybulk fleet purchase had a stated purchase price of $835.0 million, including assumed bank liabilities, bareboat obligations and finance lease obligations. The filing classifies it as an asset acquisition; cash-flow-statement consideration for the acquisition was $370.6 million, subject to working-capital and debt adjustments.
- Net income included a $149.4 million net gain on vessel sales, partially offset by $7.9 million of impairment losses on vessels committed for sale. Adjusted EBITDA excludes the vessel-sale gain and other specified items.
- FY2021 included merger-related gains and costs, including $80.8 million of equity earnings associated with acquiring control of Navios Containers, a $48.0 million bargain gain and $10.4 million of merger transaction costs; these did not recur in 2022.
- Capital expenditures were $610.6 million in 2022, primarily for fleet expansion, versus $278.8 million in 2021. Operating cash flow also rose, but investing needs and debt repayments absorbed substantial cash.
Outlook, commentary and risks
The filing provides no formal earnings or revenue guidance. Management describes a diversified chartering strategy: about 88.0% of available containership days, 41.1% of drybulk days (excluding index-linked days) and 72.9% of tanker days were fixed for 2023 as of the filing’s fleet discussion. Management intended to retain some drybulk exposure to market rates. It also reported a fleet average age of approximately 9.5 years and an average remaining charter duration of approximately 1.9 years as of March 2023.
- Shipping rates and vessel values are cyclical and volatile. Weaker charter markets, expirations or counterparty defaults could reduce revenue, liquidity and covenant headroom.
- Debt increased, and the company is exposed to interest-rate changes. A 1 percentage-point increase in LIBOR/SOFR was estimated to increase 2022 interest expense by $12.6 million. The filing reports compliance with applicable financial covenants at December 31, 2022.
- Liquidity warrants attention: negative working capital and scheduled principal payments coexist with management’s forecast of adequate liquidity. The reported 2023 debt principal maturity is approximately $396.1 million.
- Other material risks include fuel and operating-cost inflation, off-hire and drydocking, vessel impairment, environmental and decarbonization requirements, sanctions and geopolitical disruption (including the Russia-Ukraine conflict), and exposure to China-related trade. The company generally does not maintain loss-of-hire insurance for extended off-hire periods.
- Related-party dependence is significant: affiliated managers provide vessel and administrative services, and related-party vessel operating expenses were $312.0 million in 2022. Management agreements are scheduled to expire January 1, 2025, subject to renewal provisions and potential termination fees.
- Management reported effective disclosure controls and internal control over financial reporting; the auditors gave unqualified opinions. The audit identified vessel recoverability as a critical audit matter because forecasts for uncontracted charter days require significant judgment.
Important facts for investors to verify
- Reconcile the $835.0 million stated fleet purchase price with the $370.6 million cash-flow-statement consideration, assumed obligations and purchase-accounting allocation.
- Review the debt maturity schedule, refinancing capacity, floating-rate exposure and covenant definitions, particularly given negative working capital and 2023 principal payments.
- Check charter coverage, rates and expiration dates against management’s 2023 fixed-day percentages and the fleet’s short average remaining charter duration.
- Assess the sustainability of the $0.05 quarterly distribution under maintenance and replacement capital needs, debt restrictions and board discretion.
- Evaluate vessel-sale gains, impairments and acquisition-related accounting separately from recurring operating performance; also review subsequent vessel sales and financings disclosed after year-end.
- Review related-party management fees, reimbursements, termination provisions and conflicts of interest, as well as execution and funding needs for committed newbuildings.