Navios Maritime Holdings (NYSE:NM) Q3 2016 Earnings Conference Call November 22, 2016 8:30 AM ET
Angeliki Frangou - Chairman and Chief Executive Officer
George Achniotis - Chief Financial Officer
Tom Beney – SVP, Commercial Affairs
Ioannis Karyotis – SVP, Strategic Planning
Noah Parquette - JPMorgan
Prashant Rao - Citi
Herman Hildan - Clarksons Platou
Thank you for joining us for Navios Maritime Holdings Third Quarter 2016 Earnings Conference Call. With us today from the company are Chairman and CEO, Mrs. Angeliki Frangou; Chief Financial Officer, Mr. George Achniotis; SVP of Commercial Affairs, Mr. Tom Beney; and SVP of Strategic Planning, Mr. Ioannis Karyotis
As a reminder, this conference call is being webcast. To access the webcast please go to the investor section of Navios Maritime Holdings website at www.navios.com. You’ll see the webcasting link in the middle of the page, and copy of the presentation referenced in today’s earnings conference call will also be found there.
Now, I’ll read the Safe Harbor statement. This conference call could contain for-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Navios Holdings. Forward-looking statements are statements that are not historical facts. Such forward-looking statements are based upon the current beliefs and expectations of Navios Holdings Management and are not subject to risks and certainties, which could cause actual results to differ from the forward-looking statements. Such risks are more fully discussed in Navios Holdings filings with the Securities and Exchange Commission. The information set forth herein, should be understood in light of such risks. Navios Holdings does not assume any obligation to update the information contained in this conference call.
The agenda for today’s conference call is as follows. We’ll begin this morning’s call with formal remarks from the management team, and after we’ll open the call to take questions. Now, I turn the call over to Navios Holdings Chairman and CEO, Mrs. Angeliki Frangou. Angeliki?
Thank you, Laura. Good morning to all of you joining us on today's call. Please turn to Slide 3 where we provide a company highlight. Navios Holdings controls 66 modern vessels. Our size and purchasing power creates efficiencies and cost savings by creating operating levers through our scale, technical competencies and world class employees. Our OpEx is 43% below the industry average. The savings are especially significant at the bottom of the cycle.
Slide 4 and 5 illustrates our corporate structure and the diversification. Navios Holdings value derives from 5 areas, the dry bulk fleet of Navios Holdings and four principle operating entities. Each company has a strong balance sheet and a good cash flow. While the value of these entities may not be currently appreciated by the market we believe that the intrinsic value of these companies will be recognized over time.
Slide 6 details Navios Holdings recent developments. Navios Holdings performed solidly in Q3. We earned 38.5 million in adjusted EBITDA and have 163.3 million of cash. About 85% of our total debt has no loan to value maintenance covenant. At the time of perhaps historic asset value volatility this has added meaningful stability to our structure.
Cost management has been our mantra. Our G&A on a per available days’ basis makes us one of the lowest cost operators as compared to our publicly listed shipping peers. We expect to reduce our G&A by approximately 40% by the end of 2016. During the quarter we received a $70 million loan from Navios Acquisition. The loan was advanced on market terms as determined by an independent process followed by both companies. Navios Holdings also received 16.1 million loan to refinance a Capesize vessel. The loan has interest rate of LIBOR plus 3%, 25 year amortization profile adjusted for age and a 6-year term. The loan does not amortize until January  [ph] with a balloon payable by 2022.
The next few slides review the steps we have taken in 2016 to reduce our daily cash breakeven by $1274 per day all at 10.4% for 2017 as we transition through this distressed dry bulk shipping cycle. As you can see on Slide 7, Navios Holdings executed an exchange program for its outstanding Series G and Series H ADS and acquired 61.1 million of this ADS paying 28% of the par price.
We eliminated 36% of the outstanding preferred and reduced our annual dividend application by 5.3 million. We also eliminated 4 million of accrued dividends. Navios Holdings paid 8.7 million in cash and issued 7.59 million new common shares as consideration for the tender ADS.
Slide 8 summarizes our liability management. We have repurchased almost 60 million in face value or 17% of our unsecured bonds for 30.5 million in cash thereby saving the company 4.8 million in annual interest or 11.2 million in interest through the bond’s maturity. The opportunistic bond repurchase has a positive $0.26 impact on NAV and reduces our daily cash break-even cost by $231.
Slide 9 highlights how we’ll reduce our cash requirements for commercial banks debt, for the next 15 months through the end of 2017 we expect to reduce our cost requirements by 11.4 million by deferring loan amortization payments of from repaying debt at the benefit of its nominal value. Additionally, Navios Holdings expects to earn 2 million in positive cash flow through Q1 of 2017 from the refinancing of two Capesize vessels one of which is under approval process. NM daily cash breakeven is expected to be reduced by $530 as a result of this effort.
Slide 10 shows how we’re reducing the average cost of our charter in fleet. During the quarter, we agreed to charter in seven additional vessels for two years. This has a direct benefit of reducing our average charter in cost of our core fleet by $2220 per day or 15% in 2017 and $2107 per day in 2018. Navios Holdings’ daily cash breakeven is expected to be reduced by $513 per day as a result of this charter ins.
Slide 11 summarizes the results of our initiatives to reduce 2017 daily cash flow breakeven. As an result of our focused efforts, we have successfully been reducing our daily cash breakeven by $1274 for the next year. Reducing cash breakeven helps NM transition through this distress dry bulk shipping cycle.
On the revenue side we have outperformed the spot market year-to-date through a number of creative approaches.
Slide 12 shows our fleet achieved a Navios time charter equivalent rate of $2524 greater than the daily spot market. These efforts resulted in us having 41.3 million more of charter revenue for the first nine months of 2016 than we would have had under average spot market rate.
Slide 13 highlights our strong liquidity position. Our balance sheet has net debt to book capitalization of 57.6%, cash 163.3 million and 191.6 million in total liquidity. We have no committed shipping growth CapEx or any material debt maturities until 2019.
Slide 14 sets forth Navios new low cost structure. For 2017 we have fixed 35.2% of our available days of which 26.7 are index linked charters at an expected average contracted daily charter out base rate of $9341 per day. Our fleet open days plus days contracted with index linked charters and profit sharing could provide incremental revenue at current market rate and could improve our daily charter out base rate to $8836 per day for 2016 and $11,529 per day for 2017.
I would like to remind you as I do every quarter that our breakeven analysis includes all operating expenses, day-docking expense, charter in expense for a charter in fleet, G&A cash expenses as well as interest expense and capital repayment. And now, I would like to turn the call over to Mr. Tom Beney, Navios Holdings Senior Vice President of Commercial Affairs. Tom?
Thank you, Angeliki. Slide 15 presents our diversified dry bulk fleet consisting of 66 dry bulk vessels totaling 6.7 million deadweight split between Capesize Panamax and Super Max Handy. We continue to be one of the largest US listed dry bulk operators in the world established over 60 years ago. We have 59 vessels on the water with an average age of 7.8 years. This is 9% younger than the industry average. Navios Group's total fleet of 165 vessels includes 47 tankers, 20 container vessels, and 97 dry bulkers.
Slide 16 provides an overview of our operating leverage. This is an essential skill for any transportation company. Unlike many of our competitors, we manage our vessels in-house. By doing so, we have an internalized the cost savings achieved with scale and increased our purchasing power. Focusing on Navios Holdings, you could see that NM has developed significant efficiencies from economies of scale as our OpEx is 43% below the industry average. This equates to 36.1 million in annual operating cost savings. As you can see Navios Holdings shares these savings and creates considerable extra value for the other companies of the group.
Turning to Slide 18, GDP forecast for 2016 and 2017 suggest continued dry bulk demand with emerging market growth predominantly in the Asian region as the major driver. In the largest oil consuming economies such as China, India, Japan, Europe, and the US continued low energy prices tend to stimulate GDP growth over time further aiding dry bulk market as was experienced in the late ‘80s.
After a slow start to 2016, demand for the major dry bulk commodities, iron ore, coal and grain have exceeded forecasts. The BDI bottomed in February at 290 and has risen to 1240 as of Monday, November 21st. Chinese economic policy has been instrumental in supporting dry bulk trades. Increased loan initiations for housing and infrastructure, support of the Chinese construction industry, increasing steel demand. Also forced reduction in domestic coal output increased Chinese coal imports as electricity consumption increased, improved share of protein in Chinese diets supports the ever increasing imports of grain seen over the last few months.
Coupled with the effects of heavy scrapping earlier this year, dry bulk rates have been well supported into the seasonably strong fourth quarter. The seasonal Q1 dip is on the horizon, but with the current improvement in the Chinese economy it looks less likely dry bulk will experience the precipitous Q1 rate declines we have seen over the last couple of years.
Please turn to Slide 19 and demand for iron ore. As shown in the upper right table, overall worldwide seaborne iron ore is now forecast to grow by 4.9% in 2016, a positive change from the negative growth forecasted during Q1. Seaborne iron ore is forecasted to further expand by close to 4% next year led by a 5% increase in Chinese imports. China accounts for about 70% of the world's seaborne iron ore imports.
Chinese steel production rebounded in March and has remained above last year's level since then. Steel production in China is expected to remain flat in ’16 versus ’15. Chinese steel exports increased at the beginning of the year but have decreased since August year on year as most steel stays at home to supply the improved domestic market. Chinese iron ore mines cannot compete with high quality are coming from Australia and Brazil at current prices encouraging increased imports. So far in 2016, Chinese iron ore imports have increased by about 9%, and domestic production of iron ore has reduced by approximately 7%.
With demand for iron ore up, the delivered price to China has improved. This has seen exporters outside of Brazil and Australia increase their are shipments over the quarter, a reversal in the decline seen over the last few years
Please turn to Slide 20. The Chinese domestic coal industry seems to be going through a phase of restructuring similar to the one that the iron ore industry went through in the past several years whereby low quality uneconomic capacity is being shutdown. Domestic coal production is expected to be down by about 12% in 2016, a decrease of over 400 million tons. This has been partially replaced by additional imports were expected to be up 14% by year-end, a complete turnaround from the decline in imports we've experienced in 2014 and 2015.
Indian coal imports started the year declining by 5.3% in Q1. Since May imports have increased year on year as domestic coal stockpiles have reduced and electricity production has grown. By year-end the Indian imports are projected to be up by about 4%. Combined Indian and Chinese imports are now expected to increase by about 8% annualized, a major improvement from forecasts at the start of 2016.
Slide 21 shows another aspect of the dry bulk market that is coming into focus as China's economy continues to improve. As per capita incomes increase the country will consume more protein. Chinese per capita meat consumption still lags the OECD by a considerable margin. Chinese imports of soybeans and soybean meal, an important feedstock for animals are forecast by the USDA to increase dramatically in the next 10 years. Grain is an inefficient cargo. Loading delays due to complicated logistics and weather issues make the total days of a voyage increase absorbing ship capacity. The main export countries for grain tend to be Atlantic based and the main import regions are Pacific based also contributing to longer haul routes.
Turning to Slide 22, scrapping year to date is 28 million deadweight, scrapping annualized should be over 32 million deadweight for 2016. There has been a slow down with scrapping recently due partially to the recovering market. With additional investments needed in vessels for third special surveys or beyond and the recently ratified Ballast Water Management Convention, a decent level of scrapping can continue. Based on the latest available data net fleet growth for both capes and panamaxes had been minimal since the beginning of 2015. There are only 12 more capes in service now than there were in January 2015 out of a total cape fleet of about 1651 ships. Similarly, there are only 23 more Panamaxs in service out of a total Panamax fleet of around 2445 ships.
The average age of scrapping has reduced to about 23 years old from about 32, six years ago. During the last 12 months we have regularly seen vessels scrap to 20 years or under and recently a number of 15-year-old dry bulk vessels have scrapped.
In Slide 23 we see as of January 1, the 2016 order books stood at 92.7 million deadweight, by end October the latest four months statistics 42.8 million deadweight has actually delivered versus 81.9 million deadweight which was expected. A 48% non-delivery rate by deadweight, the highest non-delivery rate since 2009, if we assume a more conservative 45% non-deliveries, then we estimate 2016 we’ll see about 51 million deadweight actually deliver.
With the current 2016 scrapping rate annualized net fleet growth will be about 2%. The book as of January the first reduces by about half in 2017 according to a current statistics from Carlson's Research. With freight rates and second-hand asset prices also low, there is currently little to no incentive to place additional new building orders.
Slide 24 is a recap of the trends in delivery scrapping and net fleet growth since 2009. As we have discussed scrapping is running at a healthy annual pace although it has slowed recently. Looking forward Q1 is typically the quarter where we see more vessels scrapped. Vessels of 20 years or over totaled 56 million deadweight or about 7% of the total dry bulk fleet growing to over 116 million deadweight or 15% of the total fleet for vessels 15 years or more. Non-deliveries are running at a record high. Net fleet growth should be just above 2% similar to the levels seen in 2015, the second year with low fleet growth, a stark contrast to the double digit net fleet growth of 2009 to 2012.
With the order books staying low for 2017 and non-deliveries expected to continue very low fleet growth in 2017 is a real possibility. With dry bulk demand continuing to surprise the experienced forecasters, the market fundamentals look set to improve. I would now like to turn the call over to our CFO, George Achniotis for the Q3 financial results. George?
Thank you, Tom. Please turn to Slide 25 for a view of the Navios Holdings financial highlights for the third quarter and nine months of 2016. Adjusted EBITDA for the quarter was 38.5 million compared to adjusted EBITDA of 39.5 million in ’15. EBITDA for the third quarter in the nine months of ’16 was adjusted to exclude a 16 million gain from the repurchase of loans at a discount, an 8-million loss representing our share of Navios Partners’ impairment losses.
In 2015, this value was adjusted to exclude 1.8 million non-cash loss on available for sale securities. The decrease in adjusted EBITDA is mainly attributable to reduction in earnings from affiliates and a reduction in the EBITDA of Navios South American logistics. The decrease was partly mitigated by [34%] [ph] reduction in time charter, voyage and logistics expenses due to the delivery of a number of charter in vessels and by a 5% increase in time charter equivalent rate achieved compared to Q3 of ’15.
Net loss for the quarter was adjusted to exclude the items on effected EBITDA as well as the 10 million write-off of intangible assets due to the earlier delivery of a charter in vessel. Adjusted net loss for Q3 of ‘16 was 22.4 million or $0.25 per share compared to an adjusted net loss of 20.3 million or $0.23 per share in ’15. The reduction is mainly due to the decrease in EBITDA.
Turning to the nine months results, adjusted EBITDA increased by 17% to 114.9 million compared to 98.5 million in '15. Similar to the quarterly results, the increase was mainly due to the reduction in cost due to the redelivery of some charter in vessels, a 3 million reduction in G&A expenses and 2.9 million reduction in direct vessel expenses. Adjusted net loss for the first 9 months of ‘16 was 56.6 million compared to an adjusted net loss of 71.2 million in ’15. The improvement was mainly due to the increase in EBITDA.
Please turn now to Slide 26. We continue to maintain a healthy cash balance. At September 30, 2016 we had 163 million in cash compared to 177 million on December 31, 2015. As Angeliki already mentioned during the quarter Navios Acquisition provided a 70 million secured loan to Navios Holdings at market terms. 50 million was drawn at the end of the quarter. Deposits for vessel acquisitions have increased to 160 million compared to 74 million on December 31, 2015 as the construction of the port in Uruguay progresses. We repurchased a total of 58.9 million or 17% of the par amount outstanding of 2019 senior notes. In so doing we save 4.8 million annually in interest payments or 11.2 million at maturity. We used 30.5 million of cash for these transactions. The aggregate balance of our senior notes is now $1.322 billion from $1.351 billion at year-end. This does not reflect the additional amounts repurchase in Q4.
Over the next slides we will briefly review our subsidiaries. Please turn to slide 27. Navios Holdings owns 20% of Navios Partners including a 2% GP interest. Navios Partners owns a fleet of 32 dry bulk and container vessels. NMM today is a unique platform in the dry sector with contracted revenue covering all of its cost for 2017 and commercial and technical management cost fixed through December 2017 at rates 17% below industry averages. NMM can generate significant free cash flow as detailed in NMM's earnings presentation last week even in the low charter rate environment of today it should be able to generate about 21 million for Q4 of ’16 and about 84 million for 2017 assuming steady operating costs and current market rates for the open days. The cash flows generated so far in ’16 have been used to expand the fleet by acquiring a cape size vessel and also paying down debt.
Turn to Slide 28. Navios Holdings has over 46% interest in Navios Acquisition. Navios Acquisition has 36 modern high-quality vessels with an average age of 5.8 years diversified between crude, product and chemical tankers. All the vessels are on the water generating cash flows. The fleet is effectively fixed for the balance of 2016 and 60% fixed for ’17. NNA’s charter in policy of seeking long-term charters provided above market earnings during the third quarter, a period during which both charter rates were correcting. NNA’s average charter in for its combined fleet was about 54% higher than the market average.
Navios Acquisition is the sponsor of Navios Midstream Partners, an MLP with six VLCCs providing a platform in the wet sector for dividend seeking investors and bringing flexibility and liquidity to NNA. In 2016 NNA will receive about 21 million in dividends from NAP. Navios Acquisition will also provide about 15 million in dividends to Navios Holdings during 2016.
Now I will turn the call over to Ioannis Karyotis for his review of the Navios South American logistics results. Ioannis?
Thank you, George. Slide 29 provides an overview of the Navios Logistics business. We initiated arbitration proceedings in London in June of this year after Vale advised in writing that they will not perform the 20-year take or pay service contract for the iron ore facility currently under construction in Nueva Palmira in Uruguay. This confidential proceeding is progressing. We continue the construction of the new terminal and as of Q3 2016, we have incurred approximately 118 million of expenses and we have remaining contractual obligations of about 26 million. In total, we have paid [during year] [ph] approximately 144 million out of a total budgetary CapEx of approximately 150 million.
Slide 30 reviews our results. In the nine-month period to September 30, 2016, EBITDA was 60.9 million compared to 64.5 million in the same period last year.
For the third quarter, port segment revenue was stable compared to the same period last year as an increase in sales of products mitigated decreasing port terminal revenues. However, as a sales of product has lower margins EBITDA was 7.7 million compared to 9.7 million in Q3 2015. The decrease is attributable to lower throughput in the dry terminal which was affected by weaker Uruguayan soybean production due to heavy rains earlier this year and reduced transshipments of Paraguayan corn. In the bulk segment, Q3 EBITDA reached 7.3 million compared to 11.9 million last year. The decrease is attributable mainly to higher voyage expenses due to more trips performed under our COAs with minimum guaranteed quantities, and increased operating cost mainly repair and maintenance expenses.
Cabotage business Q3 EBITDA decreased by 10% to 4.1 million compared to the same period last year mainly due to less available days. Overall, Q3 EBITDA decreased by 27% to 19.1 million. Net income in Q3 2016 was 2.8 million compared to 10.6 million in the same period last year mainly due to the decrease in EBITDA.
Turning to the financial results for the nine month period ending September 30, 2016, revenue decreased by 11% to 177.4 million; EBITDA decreased by 6% to 60.9 million and net income decreased by 24% to 15.8 million mainly due to the decrease in EBITDA, higher depreciation and income tax expenses.
Please turn to slide 31. Navios Logistics has a strong balance sheet. Cash at the end of Q3 2016 was 70.2 million compared to 81.5 million at the end of 2015. Net debt to book capitalization was 45%. As of September 30, 2016 we have drawn approximately 28.9 million net under the unsecured export financing facility related to the new iron ore terminal. The undrawn amount under this facility was 8.3 million including interest and all related costs. This facility has an eight year term.
Now I would like to turn the call back to Angeliki.
Thank you, Ioannis. This completes our formal presentation. We open the call to questions.
[Operator’s Instructions] Our first question comes from Noah Parquette with JPMorgan.
I just want to firstly ask about the charter ins, interesting you guys put some more charters in place at the current market levels, that’s great. Can you give some guidance about your charter-in obligations beyond 2017? How many vessels are coming off next year and how do you think about that part of your business?
You should see that charter in strategy compare with our overalls strategy of breakeven. I mean we approach the breakeven in three ways and we manage to reduce it by $1200 which is almost 10%, an equivalent of almost 27 million of overall savings. The one was, straightforward buy your bonds, 30 million, 60 million nominal price and you save about 5 million annual interest savings, that bank was also straight forward, we created a 13.5 million cash - reduce our cash requirement by about 13.5 which again we did either by buying our debt and having a discount of 3.5 million or by diverting certain capital repayments, and then the charter-in we saw our charter-in fleet and we say, okay, how do we approach this? The best way is to add vessels, we added seven vessels at an appropriate time and we brought them in for 2017 at a cost of $6830 and this included Capesizes, Panamaxs and Supramaxs and for 2018, at 2100. If you take a look of ‘17 and ‘18 we can give you the exact vessels on the back of the page which is in the appendix. You will see that actually even for '17 or ’18 is further reduces almost the same amount with some less vessels for 2018. So in essence your cost was reduced by 15% and overall package brought you to $1275. Also addressing breakeven and balance sheet we also we did an exchange offering for our preferreds shares where we bought a nominal 50 million of preferred shares for about 8 million/7.5 million shares.
You did some debt deferrals, some amortization payments, do you think there is still more room there to push back amortization payments or are you kind of comfortable where you’re at now?
Actually we look at the end result and the end result in essence is in page 14 of our presentation which is our cost. Our cost now is below 11,000 in today's environment, in today's rate you’ve free cash flow generation and if you take in consideration another issue that we as Navios concentrate very much on the charter-in strategy to take advantage of the seasonality.
If you see that in the nine months of 2016 maybe one of the most dreadful environment in history of shipping we managed to produce 50% above spot market result and about 40 million of benefit if you see. So with this kind of where we are now on cost our cash position and breakeven we see that we’re very comfortable for 2017.
Our next question comes from Chris Wetherbee with Citi.
This is Prashant on for Chris. I wanted to just clarify for the charter-in fleet the developments there. As I'm looking at it right, there is four Panamaxs that are rolling off early next year, $11,000, $12,000 [inaudible] chartered in, just wanted a confirmation that -- should we think about these vessels too as being rechartered in at these attractive rates that you've gotten on the [inaudible] and all the sort of the reduction that you had and is that sort of how we should expect the rest of the charters to roll off to be rechartered going forward?
You know the charter in fleet is an opportunistic fleet and we try to reduce the cost and take opportunity of the current market environment. It's also a relationship you’ve with the charter-ins owners, you create, you provide the ability for them to roll their vessels and you're also creating a portfolio where it makes sense.
That makes sense. And sort of turning to rates on charter-in, on the sustainability of the rate increases that we've seen, obviously there's a demand side to this equation from Indian and Chinese coal and steel production in China. It sounds like we will see some seasonality as per usual for Q1 which is to be expected. I sort of wanted to split it up into two parts, one, how do you think about - do you have an early read of how much of a seasonal step down we might see this year given that underlying trends are improving, and do you think there could be maybe a little bit of a correction before we see long term stability in rates maybe in the first half of next year given how quickly we have recovered on the demand side or is there more room to run on that based upon the demand side and based upon where prices for iron ore and steel have gone and coal pricing.
I will let Tom give a little bit more color on the market but before we go in I want to go on a very big picture, number one you had significant scrapping in the last 2, 3 years and you had - show that you reduce a fleet and then demand has gone up. The one thing I can guarantee you is there going to be seasonality which is always the case and has nothing to do with cyclical trend. So there is going to be seasonality, you manage that seasonality, this is part of our business but definitely demand is creeping up in a better situation. It will take time it's not a straight line.
But as you say you are looking forward to Q1 and people are expecting a downturn, but reality is that what we have seen in the last couple of years it's very bad sentiment in the market and what we’re are seeing now is that sentiment has changed around and we see good demand both in the steel industry and surprisingly enough for everybody around the thermal coal markets and the coking coal markets, and grain is adding on top of that.
We will almost certainly see an adjustment in the Q1 as we normally do but I don’t think it's going to be anything like what we have seen over the last couple of years where sentiment was really at a different point in the cycle.
That’s very helpful color. And then just one final question, haven’t touched on it too much on this call. The Vale contracted logistics I think you’ve spoken about maybe a resolution by year-end, is it realistic to sort of think that this could be more of a first half 2017 resolution and just sort of thinking about worse case, best case scenarios if you could comment. On the worse case you get your CapEx back, on the best case scenario that there is some at least modification maybe to the -- you get the full contract but could there be also maybe a modification something we’ve seen similar to maybe an equity payment upfront and [indiscernible] contracts going forward is that -- I just wanted to get a sense of what the options could be in terms of timing, any detail you could provide?
The arbitration proceeding is ongoing and as we have discussed this is a confidential proceeding so we cannot really discuss arbitration case and of course we have an expedited approach but we cannot also know exactly when the arbitration process will be completed.
We have time for one final question. Our final question at this comes from Herman Hildan with Clarksons Platou.
So my first question, looking at Navios logistics obviously regarding to what happens with the Vale contract it will have no commitment or significant maturities from when the terminal is completed, as a major shareholder could you give some color on kind of the how you prefer logistics to use cash generation in the coming years without -- would it be further port expansions, will it be debt repayments or other types of investments.
Logistics, has to look at the exact growth patterns, the good thing is it's not tied up to one commodity. You have agriculture products which is growing stronger for many, many years and I don’t know, so you are not tied to one, and there is multiple ways where you can lever either the port, barges or capotage, with capotage has been also very profitable, Argentina is coming out of a period where it integrates with the rest of the world. So we need to see, I mean we have a major arbitration and we have to see how this will develop but I'm very optimistic overall on the area and the ability of the company to grow. Also another very important thing that we see in that area is that we had a competitor that was not very disciplined and that also put pressure in our overall earnings. I think this company is now changing, there is new stakeholder and there is new agreements they will have a financial return and that automatically will create better opportunities for the overall business.
And just finally now looking at the holdings again you know standalone cash if you exclude logistics it's not 3 million you’ve another 20 from the facility you secured during the quarter, how much of that capacity are you comfortable of using to kind of lower your breakeven further and straight out actually creating equity value as you kind of pointed out today.
This is opportunistic; you’ve seen that we worked on our balance sheet significantly. We bought about 120 million of different securities and created equity value. So this is not something that we’re seeing it lightly but first protection of our downside so breakeven to is lower and we see that we brought down our breakeven with the environment becoming a little better, sentiment is better and that also effects and we will be very opportunistic on the balance sheet. It is one of our priorities.
And finally, just to be clear the numbers provided on the buyback that’s as of today, not as of quarter-end, right?
This does conclude the Q&A session for today’s program. I will now turn the call back over to Ms. Angeliki Frangou for any closing remarks.
Thank you. This completes our Q3 results.
Ladies and gentlemen, thank you for your participation in today's conference call. You may now disconnect your lines.
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