Yet depressed time charter rates are really taking a toll on its earnings. For the most recent quarter, the shipper posted a net loss of $3.2 million, marking an enormous downturn from last year’s net income of $20 million. First-quarter results were negatively impacted by one-time impairment charges of $3.3 million, and, more importantly, by a greater-than-50% nosedive in time charter equivalent – the No. 1 metric of evaluating ships’ average daily revenue performance.
Navios Maritime Holdings Inc. (NYSE:NM): The newbuilding frenzy
Tightening environmental regulations and lofty fuel costs raised shippers’ appetite for new-generation vessels. Given the fact that newbuildings’ prices are bumping along the bottom, investing in a new and more efficient vessel, even at current market conditions, seems like the right thing to do.
Moody’s says that Navios Holdings’ comparably young and advanced fleet could enable it to have the edge over its peers and emerge as a winner from an industry rebound.
The current average age of the shipper’s operating fleet is 6.2 years. In addition, it has three newbuilding charter-in vessels expected to be delivered at various dates through April 2016. Moreover, during the quarter, Navios Maritime Holdings Inc. (NYSE:NM) bought four secondhand dry bulk ships for an aggregate purchase price of $66 million.
More importantly, it formed Navios Asia LLC in partnership with a Japanese shipowner. Navios Asia will serve as an acquisition vehicle for Japanese-built dry cargo vessels. The initial plan is to acquire five Panamax and one Kamsarmax vessel for $114 million.
Since the beginning of the year, Navios Maritime Holdings Inc. (NYSE:NM) has rallied as much as 67%, approaching its 52-week range of roughly $5.70. However, for the first quarter of 2013, Navios Maritime Holdings Inc. (NYSE:NM) did not pull through the industry’s economic woes. It swung to a $10.2 million loss, versus last year’s first quarterly net profit of $9.46 million. Revenues followed a double-digit down trend, but still managed to beat analysts’ expectations.
A breath of fresh air for Greek shippers?
Over the past couple of years, adverse factors such as deterioration of shippers’ asset values, increased loan provisions, and default risks urged banks to clamp down on credit supply. Meanwhile, many shipowners have been operating in the red, striving to stay afloat. Liquidity shortages have been a real thorn in their sides, especially for some of the smaller players.
In its latest annual report, Petrofin Bank Research pointed out that, for 2012, of the total 51 banks engaged in Greek ship finance, 13 banks increased their financial exposure by 38%. On the other hand, 21 banks turned their back on Greeks and reduced their exposure by an average of nearly 15%.
Fortunately, just a few days ago, Greek shippers got a breath of fresh air after sealing some sweet deals with Chinese banks. Greek ship owners and Chinese shipyards have been getting along just fine for quite some time now. It is estimated that Greek-owned shipping companies are building more than 150 vessels in China. This translates into around 10% of Chinese shipyards’ order book. In turn, Chinese banks have been rather openhanded when it comes to funding Greek shippers’ operations.
The bottom line
After watching closely industry trends, and poring over earnings reports, I’ve come to the conclusion that investors should not be carried away by shippers’ attractive valuation metrics, and think twice before placing a bet on a dry bulk carrier.
As I mentioned in a previous article, Greeks’ recent buying-spree is just adding more fuel to the fire. Advanced and eco-friendly vessels are most definitely necessary in order to lure potential clients, and pave the way for profitability. Nonetheless, over the medium term, pitfalls stemming from the continuing imbalance between demand and tonnage supply are slowing down the industry’s recovery by pushing down daily rates.
The “bad days” may be behind us, but the much-anticipated industry comeback may take longer than expected.
Fani Kelesidou has no position in any stocks mentioned. Follow Fani on Twitter @FaniKelesidou The Motley Fool has no position in any of the stocks mentioned.
The article Why You Need to Think Twice Before Investing in a Greek Dry Bulk Shipper originally appeared on Fool.com.
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