Ultrapetrol (Bahamas) Limited (NASDAQ:ULTR)
Q4 2015 Earnings Conference Call
April 19, 2016 10:30 AM ET
Leonard Hoskinson - VP
Damian Scokin - CEO
Cecilia Yad - CFO
Welcome and thank you for standing by. At this time all participants lines are in a listen only mode. For the question-and-answer session of today's conference, [Operator Instructions]. This conference has been recorded. If you have any objections you may disconnect at this point.
Now I’ll turn the call over to your host Vice President, Leonard Hoskinson. Sir, you may begin.
Thank you, Blair. Good morning everyone and welcome to Ultrapetrol's conference call to discuss the company's fourth quarter and full year 2015 earnings. I would like to remind everyone that this conference call is now being webcast at the company's Web site www.ultrapetrol.net. There are also additional materials related to our earnings announcement on our Web site including the slide presentation which forms a part of this conference call.
You should be aware that in today's conference call we will be making certain forward-looking statements to discuss future events and performance. These statements are subject to risks and uncertainties that could cause actual results to differ from the forward-looking statements. For a discussion of the factors that could cause results to differ, please see the company's file 20 F and the press release and 6-K that was filed yesterday after market close, as well as the company's prior filings with the SEC.
With me today is Mr. Damian Scokin, our Chief Executive Officer and Ms. Cecilia Yad, our Chief Financial Officer. Damian will give an overview of the fourth quarter and the full year 2015 results and take you through the key areas of focus as we move forward. Cecilia will then take you through the financials and after closing remarks with Damian we will then be happy to take your questions.
So, Damian, I would pass it over to you.
Thank you and good morning everyone. I am pleased to join you for today's conference call. And I look forward to taking your questions after briefly discussing our business, the broader market environment and the results of our ongoing presentation of our strategic initiative to strengthen Ultrapetrol.
If we turn to Slide 3, you can see a summary of our fourth quarter and full year 2015 compared to a same period of 2014. These results are broken up by segment. So while we do experience some improvement in the fourth quarter of 2015 from the levels we have achieve in 2014, Our full year result continue to experience downward pressure from the significant depressed markets both of iron ore, soybeans and also oil, and also the continuous difficulties at the Petrobras and the foreign exchange impact of the depreciation of the Brazilian real.
Adjusted EBITDA for the fourth quarter of 2015 was $2.2 million up from a loss of $1.6 million in 2014 period. For the full year 2015, adjusted EBITDA was $53.2 million, down from $57.1 million in 2014. Total segment adjusted EBITDA which excludes the impacts of foreign exchange effect was $3.3 million for the fourth quarter of 2015, that is up from 62,000 in the 2014 quarter.
Total segment adjusted EBITDA for the full year of 2015 was $57.9 million, up from $54.9 million in 2014. Given the extent of the difficulties in the commodities markets, the core demand drivers of our business and the impact of Petrobras’s abrupt pull back in the offshore space including contract cancellations during the third quarter, our ability to achieve year-over-year improvement on an adjusted basis says a great deal about the impact of our strategic initiatives to improve the business, mainly in the River segment.
I will now provide you with a more in-depth look at what we are doing in each of the businesses and how that is impacting the key performance indicators in each of our segments. If you now turn to Slide 5 you can see illustrations of the depressed market conditions for the primary commodities moved by our River business. This historically low pricing level have led to both a significant drop in iron ore production and an excess of barges in the River chasing the lower quantity of cargos at obviously lower price rates.
In this environment and in line with one of the tenants of our strategic initiatives we have sought to lock in contracts in order to maximize asset utilization and limit our exposure to volatility and offhire. This strategy has enabled us to largely maintain cargo volumes despite over capacity of budgets in the River though this contract’s renewal has come at an expense of reduced rates, which declined 22% during the fourth quarter of 2015 compared to the fourth quarter of the previous year. This decrease is largely in line with the industry.
It is important to note though that net tons transported during the fourth quarter of 2015 increased by 28% when compared to the same period of 2014, driven mainly by improved maize volumes.
On Slide 6, you can see the positive impact of our contracted business and emphasis on operational efficient through our point-to-point operational model. Cost reductions through lay up of excess pushboat capacity and headcount reductions at crew level as well as our shipyard. Our maritime charter continued while the Barren Island [ph] take-or-pay contracts performed expected. These efforts enable us to realize improvement on asset utilization transit times and in cost per ton transported. Though we did experience increase of higher days this is largely as a result of unexpected extensions of scheduled maintenance on three pushboats.
If you now turn to Slide 8, there you can see the environment of our offshore supplies business were low oil prices which were down by over 50% from the levels in the fourth quarter of 2014 continued to put pressure on spot rates for offshore supply vessels and more broadly on CapEx in the offshore energy industry. Petrobras was a prominent example of this difficulty announcing a further 32 billion reduction of CapEx to its 2015 to 2019 plans, which including both portfolio pivotation and a substantial exchange rate impact related to the collapse of the Brazilian real.
Despite this Petrobras continues to require the services of offshore supply vessels to carry out its fundamental business of offshore oil extraction, and we have received positive preliminary results on the recent tender with Petrobras in relation to several of our vessels that are clearly offhire.
In the meantime, as you can see in Slide 9, the industry continues to be difficult with overall vessel utilization in the North Sea decreasing from 99% at the end of 2014 to 73% at the end of 2015, with a similar decrease experienced in markets globally effective over that period.
Our UP Jasper and UP Agate continue to be affected by this though they along with UP Esmeralda and UP Amber and UP Pearl are part of a Coral Petrobras tender process that has yielded positive preliminary result for a contract that involves the grantee of our REB rights.
If you now turn to Slide 10, we have provided an update of our offshore supply business KPIs. To ensure the impact of our laid up North Sea vessels, our three cancelled Petrobras PSV and our block PSV UP Turquoise have been profoundly felt here, both in terms of loss revenue and in the [indiscernible] associated will laying off vessels. This impact substantially outweighs our efforts to make improvement in protective our revenues stream and minimizing of hire. Though we have realized year-over-year cost savings and have benefitted from our RSV UP Coral profitable operating as expected since August 2015.
Now turning to Slide 12, our Ocean business, we have continued to pursue a streamlined asset light models, selling the Product Tanker Alejandrina in late January after it had completed its previous charter in mid-September. This follows our earlier decisions to sell the Miranda
and Amadeo during July and May respectively and our variable chartering [indiscernible] to service an existing three year contract with Petrobras in Argentina. We have made progress across our initiatives this year, we have 37 year-over-year increase in revenue per day, a 17% increase in tons per quarter and if you adjust to remove the impact of the now sold out Alejandrina, a 28% decrease in offhire.
With that I’ll hand out the call over to Cecilia for the review of the financials.
Thank you, Damian. On the Slide 13, you have a condensed version of the Company's balance sheet as of December 31, 2015 versus December 31, 2014. As of December 31, 2015 we had a cash and cash equivalent on hand of 45.2 million plus 10.8 million in restricted cash, giving us total of cash of 56 million [ph] at the end of year 2015. The company made a decision during the fourth quarter not to make a 10 million interest spending during December 2015 on its outstanding senior notes. By yearend, we were able to maintain a healthy liquidity position and continue to operate our business on a normal basis. Making full and timely payments to vendors, employees, suppliers and trading counter parties.
Nevertheless, given that Brazilian market difficulties and the Company's inherent exposure to lower commodity markets, we believe that the company need to maintain a sizeable liquidity caution to remain solvent during temporary instable downturns. As a result of this we have entered into forbearance agreements through April 30, 2016 with our secure lenders granting us debt side release, waving anticipated events of default uncertain current as complaint requirements, while allowing us to continue operating the business as normal.
These agreements have enabled us to pursue a concentral [ph] financial restructuring and create a sustainable balance sheet. These productive negotiations continue to advance as we and our Board special committee analyzes all available strategic options to identify the course of actions that will maximize long term value for all the stakeholders.
During the fourth quarter of 2015, we had CapEx in a level of 4.7 million including 1.5 million of dry docks for all segments and 2.4 million mainly attributable to the River business, related to maintenance CapEx for the River. For the full year we had a CapEx of 31.2 million including 7.5 million of dry docks in all segments, 10.1 million of maintenance CapEx for the River, including maintenance of some of our business [ph] and our Parana Iron which continues under a contact with Vale and 4.6 million attributable to the offshore segment, related to our UP Coral and it’s conversation to an RSV which continues under a contract with Petrobras since August 2015.
With that I’ll like to turn the call back to Damian.
Before we take your questions, I would just like to briefly summarize that though we face considerable headwinds in the commodity markets underlying our current businesses, we continue to pursue improvements across all our business line that we expect to do that into a better position for the inevitable recovery in the cyclical markets.
We are also working very hard with our creditors to achieve a financially sustainable solution to our balance sheet. We are determined to maximize the long term value of Ultrapetrol and we continue to pursue every available avenue by which to do so.
Within that I will like to thank you for joining us on today's call and we would be happy to take your questions.
If there are no questions I would just thank everybody for participating and we look forward to continue to be in touch, thanks everybody.
Thank you so much, that concludes today's conference, thank you for participating, you may now disconnect.
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