Navios Maritime Holdings Executive Insights: Outlook and Strategy

On Thursday, Navios Maritime Holdings Inc (NYSE:NM) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Outlook

Christian Wetherbee – Citi: Yes. I just wanted to get your sense, I guess, Angeliki of kind of the market and the outlook that you would have over the course of the next year or so. We have seen this persistent weakness. You have a solid orderbook. I mean, when do you guys – kind of, what’s your internal projection as far as rates coming back a little bit, and when do you think about a potential rate increase, what do you think the magnitude can be, are we in a new normal of shipping rates that will be depressed for an extended period of time, I just kind of want to get your sense on that?

Angeliki Frangou – Chairman and CEO: Chris, to be honest, this is difficult to know for how long, but the one issue that I can tell you is that, I think, Q1 will show a very depressed rate environment. I think, we show now rate stabilizing. We also show (S&P) values meaning values of vessel stabilizing, but you may easily have a weak summer, which is seasonally low. But I don’t think from where we are we will see something substantially different on rate. I think, rates have reached a level that more or less represents the situation. Now the full recovery I will say that to see substantial recovery, it will rely of course on the scrapping rate which is going very nicely in the deliveries, but the most important issue I think will be also to see that how the growth in the U.S. which is a stable 2%, China is a little bit weak growth but is still a very nice growth. I think the most important issue to assess what is the European development. At this point in the world we have included a mild recession for Europe. With these substantial changes, it was more for a long down period.

Christian Wetherbee – Citi: Kind of along those lines, we know that European banks have not necessarily been lending to the shipping market, kind of in mass for an extended period of time, but is there – outside of your individual interactions with your lenders which seem to be so fairly fluid, have you seen anything in last month or two that would suggest an incremental level of tightening of available capital from the traditional lenders?

Angeliki Frangou – Chairman and CEO: I think – I mean if you think apart from Navios that we are very well positioned with a strong balance sheet. I think that, okay, there is some institutions that are financially strong and they can provide lending. I think the majority of the rest of the banks are in a difficult position. I think German banks are undergoing a cleanup. We have seen that – you have seen it also in the Generali news that they are going through a cleanup process and this will continue. And until the European solvency risk comes to a close, you will not see substantial changes in the banking market, because this is totally affected. The solvency crisis affects is directly related to the banking crisis. So unless this brings – you see a stabilizing of the European solvency crisis that this somehow comes to a closure, normalization, you’ll not see the banking market also normalizing.

Christian Wetherbee – Citi: One final question just on the Navios Logistics side there, I apologize if you went through this, but on the barging side of the business, how has business been kind of to-date in Q2, and again I apologize if you gave it, but I just want to get a sense of how the business has progressed coming out of some of that weakness that we saw earlier on in 1Q?

Angeliki Frangou – Chairman and CEO: I think what Yannis mentioned also in his speech, the one important and you can see really the strength of the contracts we have, the take or pay, because of these new contracts of take or pay, we have the ability even with a very weak river level in the – there was a very weak river level in the beginning of the 2012. We show that we only had a 20% year-on-year variance on our barge business. So, the new take or pay contracts really provides us on the dry iron ore shipment provides us a stability in this segment. I think this is an indication of our strategy. I think this was a very important part and provides us with a lot of stability.

Christian Wetherbee – Citi: But just as far as the activity that we have seen so far, now that we are seeing a pickup it sounds like the river conditions have improved somewhat from the first quarter. Is that the right way to think about it?

Angeliki Frangou – Chairman and CEO: Yes. The river has improved and you have flow of liquids and everything has been coming to a regular situation. But I think, what was good to see is that this, because of our new contracts the take or pay or the time charters, it has not been a devastating event.

Strategy

Randy Lawson – Imperial Capital: Just a couple of questions. Wanted to ask about, your strategy from a capital perspective going forward, you highlighted in the presentation your ability and likelihood to generate free cash flow this year. You are kind of completing the last of your acquisition, vessel acquisitions. As we look out to the back half of the year, and asset values are still depressed. Are you, do you see the Company actively looking for opportunities to acquire assets at these depressed levels, or do you think you might be in a cash flow preservation and debt pay down mode?

Angeliki Frangou – Chairman and CEO: I think, our leverage ratios are in a good level. We have a liquidity of $223 million. We have fully completed with Navios Avior that we got delivery yesterday. We have completed our newbuilding program. So I think, we are in a position to look for new opportunities. Of course, in usual conservative way, there is, because of the banking crisis in Europe, there will be, we know that portfolios will have to be cleaned up and bank loan portfolios will be rationalized. So, we are in the process of assessing opportunities. I think, we are not going to jeopardize our balance sheet, but in today’s values, today’s earnings make sense. So, we are willing to of course put some of this money in use conservatively without jeopardizing anything of our financial strength.

Randy Lawson – Imperial Capital: Then I also wanted to bring up the recent equity raise of Navios Partners, and wonder if you could comment on potential dropdowns going forward given that they have some new capital at that entity?

Angeliki Frangou – Chairman and CEO: This is a Navios Holdings earnings presentation, so we cannot comment on raisings.

Randy Lawson – Imperial Capital: But, I mean, it obviously has an impact on Navios Holdings, if you were to drop down those assets. So, I mean, is that – you have some in your fleet deck would technically qualify, I guess, do you still view that as a vehicle to raise capital for holdings?

Angeliki Frangou – Chairman and CEO: This will be up to the Board of Navios Partners to view opportunities and to decide on what they would like to do. So, I mean, we have – you have seen that prudently whatever it is done, any deal that will be done will be something that will have to be approved by independent Boards – by the independent members of the Board. So, I don’t think I can comment on this.