- Jinhui Cuts Loss as Dry Bulk Freight Rates Rise
Greek owner and operator of drybulk and container vessels Navios Maritime Partners suffered a net loss of USD 5.7 million in the first quarter of this year, compared to a profit of USD 0.2 million posted in the same period of 2016.
Revenue for the quarter dropped to USD 42.4 million from USD 45.6 million seen in 1Q 2016.
Additionally, EBITDA for the quarter stood at USD 22.7 million, down from USD 28 million reported in the three-month period ended March 31, 2016.
“We are pleased with these results as we are coming off the worst year in history for the dry bulk market – with the BDI reaching a historical low in the first quarter of 2016 and the container sector suffering its own set of challenges,” Angeliki Frangou, Chairman and Chief Executive Officer of Navios Partners, commented.
“Through balance sheet discipline and rigorous cost management, Navios Partners has weathered the storm. And, by innovative transactions, Navios Partners is positioned to thrive in a recovering
market,” Frangou added.
On March 14, Navios Partners completed the issuance of a new USD 405 million Term Loan B facility. The facility bears an interest rate of LIBOR plus 500 basis points (bps) and has a three and a half year term with 5% amortization profile. Navios Partners used the net proceeds of the Term Loan B facility to refinance the existing Term Loan B and to pay fees and expenses related to the term loans.
Also in March, Navios Partners inked an agreement to refinance USD 32 million of its existing credit facility with DVB Bank. Based on the refinanced terms, the credit facility will mature in August 2020 and will bear interest at a rate of LIBOR plus 310 bps.
During the quarter, Navios Partners acquired five dry bulk vessels – three Capesize and two Panamax bulkers – for USD 113.9 million. In addition, the company completed the sale of Navios Apollon, a 2000-built Ultra-Handymax.
“During the first quarter of 2017, we refinanced debt, so that Navios Partners has no debt maturing for over three years. Navios Partners also raised USD 100 million in equity and has acquired five drybulk vessels which are expected to provide reasonable levered returns,” Frangou further said.
In April, Navios Partners agreed to buy the entire container fleet of Rickmers Maritime Trust. The acquisition of the first five 4,250 TEU boxships is expected this month, according to the company.
In May, Navios Partners formed Navios Containers, a Marshall Islands company, which agreed with investors to sell around USD 15 million of its shares for aggregate gross proceeds of about USD 75 million. As disclosed, Navios Containers intends to use the proceeds for purchase of Rickmers’ vessels as well as for further vessel acquisitions, working capital and general corporate purposes. The offering is expected to close on or about June 1, 2017.
Navios Partners will invest USD 30 million and receive 40% of the equity, while Navios Maritime Holdings will invest USD 5 million and receive 6.67% of the equity of Navios Containers. Each of Navios Partners and Navios Holdings will also receive warrants, with a five-year term, for 6.8% and 1.7% of the equity, respectively.
According to Frangou, Navios Partners is expected to “benefit from any recovery in the container sector through its 40% equity in Navios Containers.”
In the meantime, Hong Kong-based dry bulk specialist Jinhui Shipping and Transportation Limited recorded a net loss of USD 7.97 million in the first quarter of 2017 as compared to a net loss of USD 18.5 million in the first quarter of 2016, as time charter equivalent rates more than doubled and the company’s shipping related expenses went down.
The company’s revenue for the first quarter of 2017 increased 54% to USD 15.3 million as compared to USD 9.96 million for the corresponding quarter in 2016.
The increase in revenue was mainly due to the recovering freight rates in the spot market, Jinhui said. The average daily time charter equivalent rates earned by the company’s fleet improved 102% to USD 5,925 for the first quarter of 2017 as compared to USD 2,934 for the corresponding quarter in 2016.
Dry bulk shipping market improved notably in the first quarter of 2017, Jinhui said. The market freight rates bounced back to encouraging levels since February and the uptick of rates was supported by the surge of seaborne trading activities in particular to China’s iron ore and coal imports.
With the reducing fleet growth due to continued demolitions of older tonnages and limited newbuilding entering the market, freight rates have improved year-over-year, and the average of Baltic Dry Index of the first quarter of 2017 was 945 points, which compares to 358 points in the same quarter in 2016.
”While we believe the overall recovery in dry bulk shipping market require a stronger demand and supply rebalance through slowing fleet growth, layups and scrapping of tonnages, we continue to see unpredictable and often high earnings volatility in dry bulk shipping market and we believe it will be prudent to periodically reduce indebtedness and enhance our liquidity when such opportunities arise,” Jinhui said.
The company’s shipping related expenses dropped from USD 16.2 million for the first quarter in 2016 to USD 10.7 million for the current quarter. The decrease was mainly attributable to the reduced number of owned vessels from thirty six in the first quarter of 2016 to twenty eight in the current quarter and the continued efforts in reducing vessels’ running costs under the group’s cost reduction strategy in order to remain competitive in the current tough market environment.
Looking ahead, Jinhui believes the factors that will continue to determine the pace of dry bulk market recovery are a continued positive demand growth in key dry bulk commodities importing activities from China; a continued recovery or stabilization of dry commodity prices; a reduction in shipbuilding capacity where irrational order, and hence oversupply will be discouraged; and geopolitical risks that affect the world trading pattern.
The difficulties faced by shipyards, buyers and financiers are all pointing towards a much reduced projected fleet growth, Jinhui said.
Delays, conversions of bulk newbuilding orders to other vessel types, cancellations, and shipyard defaults are currently leading to much fewer actual deliveries than previously scheduled. Asset based financing, in particular with respect to maritime assets continue to be hard and expensive to come by. A more stable operating environment will be reached if these continue, according to Jinhui.
World Maritime News