Operator: Thank you for joining us for Navios Maritime Partners' Fourth Quarter and Full Year 2018 Earnings Conference Call. With us today from the company are Chairman and CEO, Ms. Angeliki Frangou; Chief Financial Officer, Mr. Stratos Desypris; and Executive Vice President of Business Development, Mr. George Achniotis.

As a reminder, this conference call is being webcast. To access the webcast, please go to the Investors section of Navios Partners' website at www.navios-mlp.com. You'll see the webcasting link in the middle of the page, and a copy of the presentation referenced in today's earnings conference call can also be found there. Now I'll review the Safe Harbor statement. This conference call could contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about Navios Partners.

Forward-looking statements are statements that are not historical facts. Such forward-looking statements are based upon the current beliefs and expectations of Navios Partners' management and are subject to numerous material risks and uncertainties, which could cause actual results to differ from the forward-looking statements. Such risks are more fully discussed in Navios Partners' filings with the Securities and Exchange Commission. The information discussed on this call should be understood in light of such risks. Navios Partners does not assume any obligation to update the information contained in this call.

The agenda for today's call is

as follows: first, Ms. Frangou will offer opening remarks; next Mr. Desypris will give an overview of Navios Partners' financial results; then, Mr. Achniotis will provide an operational update and industry overview; and lastly, we'll open the call to questions. Now I turn the call over to Navios Partners' Chairman and CEO, Ms.

Angeliki Frangou. Angeliki?

Angeliki Frangou: Thank you, Lauren, and good morning to all of you join us on today's call. I'm pleased with the results of the fourth quarter and full year of 2018. For the fourth quarter of 2018, Navios Partners reported $31 million of EBITDA and $5.1 million of adjusted net income. For the full year of 2018, Navios Partners reported $139.1 million of EBITDA and $36.7 million of adjusted net income.

Market improved in 2018, and as a result, the Time Charter Equivalent rate for our drybulk fleet was 18% higher than 2017. We declared a quarterly distribution of $0.02 per unit for the fourth quarter, representing a current yield of approximately 8%. As you can see from Slide 5, NMM owns 38 vessels. Nearly two years ago, we leverage the weakness in the container sector by establishing Navios Containers. NMM owns 33.5% of NMCI, which has grown to 30 vessels.

Today, Navios Containers trades on NASDAQ and has a strong balance sheet and competitive position. Slide 6, sets forth the reasons we believe that Navios Partners is a premium drybulk shipping platform. Based on the charter rates of last Friday, Navios Partners should generate about $65 million of free cash flow for 2019. We have also decreased our net debt to book capitalization at the year-end 2018 at a modest 34.7% or 6% decrease compared to year-end 2017. Moreover, we have no debt maturities until the third quarter of 2020.

Slide 7 highlights our efforts of returning capital to our unitholders. We rewarded our unitholders with an $18 million in distribution for the full year of 2018. These distributions includes $13.7 million in cash distribution equating to $0.08 per unit annually, and a $4.2 million in current distribution of 855,000 unit of our ownership in NMCI. We also set in motion, a $50 million unit repurchase program that will be active for the next two years. Slide 8 highlights our positive approach to address upcoming debt maturities, including the Term Loan B.

We have finalized $175 million in bank refinancing with four banks to fund 12 vessels. All that bank financing comes with favorable terms that include lower interest rates and a debt return in a long vessel age adjusted amortization profile. You can find the details of which facility on Slide 8. Slide 9 shows a significant cash flow potential. For 2019, we have 8,578 open days plus days on index charges.

Therefore, NMM's fleet is expected to generate significant free cash flow. At current rate and with our current capital structure, NMM's fleet would generate about $65 million of free cash flow. If charter rate recovers towards 20-year averages, NMM's fleet could generate about $155 million in free cash flow, which represents an 82% of potential upside. NMM is well-positioned to get the benefits of this recovery and generate significant cash flow. Slide 10 shows our liquidity.

As of December 31, 2018, we had total cash of $61.5 million and total borrowings of $507.5 million. Our net debt to book capitalization is a modest 34.7%, a 6% reduction compared to our fourth quarter of 2017. Moreover, we have no debt maturities until the third quarter of 2020, and have power to - for future growth. At this point, I would like to turn the call over to Stratos Desypris, Navios Partners' CFO, who will take you through the results of the fourth quarter of 2018.

Efstratios Desypris: Thank you, Angeliki, and good morning all.

I will briefly review our - the financial results for the fourth quarter and year ended December 31, 2018. The financial information is included in the press release and is summarized in the slide presentation on the company's website. Before I start discussing our financial highlights, turn your attention to certain one-off items that are listed in Slide 11. These items affected both the quarter and the year ended December 31, 2018 and 2017. For simplicity, the discussion of the financial results below exclude the effect of the one-off items listed on this slide.

Also on Slide 11, our revenue for Q4 of 2018 decreased by 2.9% to $57.5 million compared to $59.3 million in Q4 of 2017. The decrease was mainly due to the decrease in the available days of the containerships, as we sold two vessels in Q3 of 2018. The decrease was partially mitigated by the 2.8% increase in the Navios Partners' available days of the fleet. Adjusted EBITDA for the fourth quarter of 2018, decreased to $51 million compared to $57.1 million in Q4 of 2018, mainly due to the $1.7 million decrease in revenues, $0.9 million decrease in equity net earnings of affiliated companies, and $3.5 million net increase in all other expense. Adjusted net income for the fourth quarter of 2018 amounted to $5.1 million, compared to $10.4 million in the same quarter of last year.

Operating surplus for the fourth quarter of 2018 amounted $14.8 million. Replacement and maintenance Capex reserve was $7 million. Fleet utilization for the fourth quarter of 2018 was approximately 99%. Moving to the 12-month operations. June 2017, our results were affected by the results of Navios Containers, which was consolidated in our accounts until August 29, 2017.

During that period, Navios Containers reported $12.4 million of revenues and $6.7 million of EBITDA. In order for the period-to-period comparison to be meaningful, we excluded these amounts from the discussion below. Time charter revenue for 2018 increased to $231.4 million compared to $199.3 million in 2017, mainly due to the 10.3% increase in available days as well as the increase in the combined Time Charter Equivalent achieved to $16,458 per day. Adjusted EBITDA for 2018 increased to $139.1 million compared to $126.6 million for 2017. Adjusted net income for 2018 amounted to $36.7 million, $15.7 million higher than 2017.

Operating surplus for the year ended December 31, 2018, was $77.9 million. On Slide 12, I will briefly discuss some key balance sheet data. At the end of the year, cash and cash equivalents were $61.5 million. Long-term debt, including the current portion, net of deferred fees and discount amounted to $507.5 million. Net debt to book capitalization was 34.7%, decreasing by 5.7% since the end of 2017.

Moving to Slide 13. We declared the cash distribution for the fourth quarter of 2018 of $0.02 per unit, equivalent to $0.08 per unit on an annual basis. Our current annual distribution provides for an effective yield of approximately 8% based on yields of this closing price. The record date is February 11, 2019 and the payment date is February 14, 2019. Total cash distributions for the quarter amount to $3.5 million.

Our common unit coverage for the quarter is 4.4x. In addition to the cash distribution, in December, we distributed approximately 855,000 shares of common equity of Navios Containers to our unitholders. The value of these units that were distributed is estimated at $4.2 million. Moving to Slide 14. You can see some recent developments in relation with the financing of - to our - of our vessels.

We concluded a $25 million bareboat lease structure for two of our older Capesize vessels that advanced approximately 70% for an average term of 5.4 years, and an age adjusted amortization profile of approximately 25 years. The bareboat lease, provides for an average daily payment of $5,200 per day per vessel. These results are implied at fixed interest rate of 7.6%. Navios has the option to buy the vessels starting at the end of year three for a price that de-escalates until maturity. The purchase obligation at maturity is lower than the scrap value of the vessels.

This financing structure has no financial covenants and no loan-to-value requirements. Slide 15 shows the details of our fleet. We have a large, modern, diverse fleet with a total capacity of 4.3 million deadweight tons, and an average age of 9.9 years. Our fleet consists of 38 vessels, 14 Capesizes, 16 Panamaxes, 3 Ultra-Handymax and 5 Container ships. In Slide 16, you can see the list of our fleet, with the contracted rates and the expected expiration dates per vessel.

Our charters have an average remaining contract duration of approximately 2.2 years. Currently, we have contracted 68.1% of our available days for 2019, including days contracted in the index-linked charters. The expiration dates extends to 2028. In Slide 17, you can see the details of Navios Containers. Recent rating was listed in NASDAQ in December, 2018.

Currently, it controls 30 containerships with a further visible growth pipeline. Navios Partners has a 33.5% ownership interest in Navios Containers. I now pass the call to George Achniotis, Executive Vice President of Business Development, to discuss the industry section.

George Achniotis: Thank you, Stratos. Please turn to Slide 19.

The IMF forecast world GDP growth at 3.5% for 2019. Emerging and developing Asian markets, which drive drybulk demand, are expected to grow at 6.3% in '19. On the back of global economic growth, drybulk trade grew by 2.4% in '18, slightly lower than the 2.9% net fleet growth. Clarksons forecast drybulk trade to increase by 2.6% in '19, and ton miles to grow by 3.4% as commodities travel longer distances to market. The average drybulk index increased by 18% in '18 compared to '17.

The drybulk markets do have substantial upside as charter rates are well below their long-term averages. Turning to Slide 20. Worldwide steel production increased by about 5% in '18 versus '17. Chinese steel production rose by an impressive 10%. Chinese steel exports continue to decrease on the bulk of increased domestic demand, which has been stimulated by large infrastructure projects.

The Belt and Road Initiative continues to be the cornerstone of Chinese economic plans for the next few years and supports the steel and power demand domestically and for exports. Substitution of Chinese expensive low quality iron ore with high quality and lower price imports continues. For 2018, domestic production was down by 40%, while imports were estimated slightly down. Chinese steel mills have been leading through their iron ore stock price, and they have been using more scrap in the steel making process. After the recent tragic dam burst at a Vale mine in the southern area of Brazil, forecasters are reviewing the potential impact on iron ore shipments and the story continues to unfold.

Vale announced the closure of 10 dams build in the same manner, which will close temporary closure of nine mines, which account for about 40 million tons of iron ore per year. Vale says that this will be offset by production in other mines. On a positive note, the Anglo American iron ore mine in Brazil, Minas-Rio, which has been closed for most of 2018, is expected to export about 60 million tons in '19. Please turn to Slide 21. The Chinese government continues to rationalize domestic coal production, closing down small, inefficient hazardous mines, and encouraging consolidation of large mining groups.

It is expected that there is restructuring, but Chinese coal industry will continue to keep domestic coal prices high and encourage high quality imports as inefficient polluting mines are closed. Chinese seaborne coal imports are estimated to be up by about 4% in 2018. Indian coal imports have increased by about 16% through November '18, and look likely to continue as power plants continue to demand more coal. Turning to Slide 22. Worldwide grain trade has been growing by a 5.4% CAGR since 2008, mainly driven by Asian demand.

Chinese tariffs on U.S. soybeans are causing trade disruptions, which were initially positive for drybulk, as ton miles increased. Exports of soybeans from the U.S. have dropped significantly so far this crop year, as China substitutes U.S. soybeans with soybeans from South America.

Projections are for the worldwide grain trade to grow 4.2% or 20 million tons in 2019. Moving to Slide 23. In spite of a significantly better market last year, the nondelivery rate remains at about 18% of the expected deliveries. 2018 net fleet growth was 2.9%. 2019 forecast are for net fleet growth about the same as '18.

Based on the current order book and shipyard's availability, low net fleet growth is expected to continue over the next few years. Turning to Slide 24. The current order book before nondeliveries is about 10% of the total fleet, which is one of the lowest on the record. In addition, vessels over 20 years of age are about 8%. Forecasted deliveries compare favorably to the overage fleet.

The expected disruption caused by the IMO 2020 fuel regulation changes should provide support to the drybulk market through 2019 and beyond. Furnished supply well tied in is about 400 vessels from Panamax to VLOC's, are currently expected to go to drydock for extended periods, to retrofit exhaust gas scrubbers. In addition, the expected increase in fuel cost in 2020 provides an incentive to bring shipments forward into the second half of '19 in slow steam vessels to reduce fuel consumption in 2020. We added course of complying with IMO regulations for balanced water treatment systems and fuel regulations are expected to result in higher scraping going forward. We are currently seeing the seasonal Q1 strongness in the market, which is exacerbated by the uncertainty in trade books, and uncertainty on how the recent events at the Vale mine in Brazil may affect the market.

With demand looking positive and supply restricted and disruptive due to the regulations for IMO 2020, the rate should correct upwards going forward. And this concludes my presentation. I would now like to turn the call over to Angeliki for final comments. Angeliki?

Angeliki Frangou: Thank you, George. We open the call to questions.

Operator: [Operator Instructions]. Your first question comes from Noah Parquette of JPMorgan.

Noah Parquette: Just wanted to follow-up since such big news now is on the Vale or news in the disruption. Can you talk a little bit about how you think the timing will play out in terms of Russia coming online and disruptions to shipments? And then on also supply side, are there any issues that we should be looking out for? I mean, do some of the Vale mixes, do they become underutilized? Or is there any think that kind of the market hasn't really thought about?

Angeliki Frangou: I think the Vale news is something that we have to - the capacity - we have to really digest. And I mean, we have seen Vale is changing their press release anytime.

It seems that there is capacity on the - as the 11 big mines, and this facility of Anglo-American and other mines have additional capacity from what we see. But the story is still unfolding. On the Valemax's, you may have also their case of - that is also developing on the same time, on the older Valemax's. So there's another level of complexity there. Overall, I think this is something that will crystallize, and you may have additional - also Valemax's, you know as the results longer, the bigger vessels with the long holes you may have also Valemax is going for trouble.

So they may have different levels of point that will be followed. I don't know it seems to be available. And it will be transported. The Pollux case is also maybe complexity is there, but it may be favorable on their - on our side.

Noah Parquette: Okay, that's helpful.

And then just talking about the share repurchase program. You guys were obviously, pretty active in buying ships in the last year and half or so, now you have this. How you kind of balance the two? I mean do you clearly see share repurchases is as attractive versus share purchases at this time? Or maybe just talk about how you see the two?

Angeliki Frangou: Listen, the reality is that we - in 2017, February, we stepped in and we bought vessels, we increased our capacity by 50%, and we increased our age profile by 20% of our vessels. And we did that in '17 and early '18. We are now at a size that is very good size of fleet.

We have seen that our leverage is below 50% of - around 50%. Our breakeven is $5,500 per open day. So again, a very good position to take advantage. So considering on the different things, you see that the sales is a good return. Let's also understand that we returned to our investors $18 million this year.

Noah Parquette: All right, okay. And then just a quick modeling one for the vessels - the refinancings. How much of that debt is associated with the term loan? Or - and how much is the other debt?

Angeliki Frangou: It's entirely with the term loan. What we're doing, we'll give - I mean, to be honest, you have seen where these markets have been in the last quarter. I mean, yes, we do not have any imminent maturities, but we'll have to prepare going in advance.

And as we show the capital market is being - the debt appearing in the last quarter. We stepped in and we created - we have agreements with large European banks, where we will refinance about $175 million of the vessels that are in the term loans. So that gives us a possibility to either reduce the entire amount or do other arrangements if we like.

Operator: Your next question comes from the line of Christopher Robertson of Jefferies.

Christopher Robertson: You mentioned earlier on the call that the use of recycled steel in China was up in 2018 as well as some inventory drawdowns of the lower quality iron ore.

What do you think about in terms of the trend of use - the use of the recycled steel? Does this continue into '19 ? Or do you have any insight about what's - what was driving that?

Efstratios Desypris: I mean that will of course depend on the amount of vessels that go for scrapping. 2017, '18, we - especially, '17 we have a lot of scrapping. This year, still too early to see how do we go. If scrapping increases, of course, the steel will be used in the steel mills. Now in terms of the inventory, we don't have precise data out of China, but it seems that they have drawn about 20 million of iron ore stocks.

Christopher Robertson: Okay. And can you give us an update around your thinking on scrubbers versus use of compliant fuel. I know last quarter that you mentioned that you didn't want to take any vessels out of service while rate were improving. But has that view changed recently in light of some of the downward pressures on the capes? And are you seeing any signs of potential rate premiums?

Angeliki Frangou: Actually, we have committed to put the scrappers in one of our cage. But we got a very good rate for four years.

So we - as we said previously, we are agnostic about the scrubbers. If we get cost plus, we are more than willing - and a nice employment, we are more than willing to do that. We like to make sure that our CapEx is fully covered and the time spend there is covered.

Operator: Your next question comes from Amit Mehrotra of Deutsche Bank.

Christopher Snyder: This is Chris Snyder on for Amit.

So we've all seen the volatility and spot rights over the past two months. You guys are obviously more exposed to the time charter market. Can you talk about how the term market is trended? You know when you're talking and having negotiations with charters?

Angeliki Frangou: I mean, listen, until two weeks ago you could do here charters on case that will be up 18,000 forward deliveries. So this is a very abrupt drop. I mean, that especially on the case that happened in the next three weeks.

Started - January, I mean, you have a very negative sentiments. I think - I don't know if the activity is really negative, it's mostly a sentiment issue. And let's not forget that we are about in the timing of new year. I wouldn't take a lot - I mean, there's too many external factors to make decisions, where the market - we don't see necessarily a slowdown around the world. On shipping, particular, your net fleet growth is not - is in a good shape.

And what you see on demand around the world, it looks very - it looks okay. So I wouldn't take that volatility that is associated also on a weak quarter to dry. And also - you have also the sentiment of Vale, which is quite significant, and that event is now - is a major event.

Christopher Snyder: The next question is on the Chinese coal market. The Q4 import restrictions kind of started this downward momentum.

So my question is just kind of how do you see the Chinese coal imports playing out over the next two years? And I ask this, I feel like historically the view has been that there are - LNG is obviously, taking share, but that is going to be offset by falling domestic production and we're going to get maybe a flat to slightly up in imports. But when you're looking at the data, the Chinese domestic coal production has actually increased in the last two years. So just kind of any, your view on that market? Because it is kind of pretty important on the midsized segments.

Angeliki Frangou: You know, one thing that we follow that - as a coal and coal is something that is a very - you have to see it in a lot of different ways. But if you go to Page 21, you will see here China is - it has a big production of coal.

But it is importing also about - it imported about 225 million tons, about 10% last year. So even though - so you have an increased coal imports, was mostly in the beginning of the year. I will wait to see because China always have a - sometimes they may have a restriction, they will come back, we have seen it in the past. And it doesn't seem that they have, I mean - and if you see on the - you may have additional imports this year. Overall, their domestic production is quite significant over 3.5 billion.

So we have to realize that no matter what is exit, the estimate for the next year is that also imports will increase by 4%.

Christopher Snyder: Okay, makes sense. And then just finally kind of bigger picture. So the drybulk stocks across the board are all trading well below NAV, despite low order books and the group having relatively healthy balance sheets. In your opinion, what is the best way for ship owners to close this valuation gap? It seems like the consensus view is that we are seeing a lot of buybacks or buyback announcements at least.

Is there anything else? Or do you just kind of agree that just keep buying back stock and hope sentiment turns more positive?

Angeliki Frangou: Sentiment is something new. I don't think you can change that up, and we have seen it in always - a broader market. I mean, we saw a fluctuation in November, December that really traded in unmet area. So that you cannot change. You have to see the economic conditions.

The sentiment needs time. Geopolitical issues, be it the Fed. It takes time. And when the issue is strong, we'll create reversal of sentiment otherwise we cannot do anything to change that. You can take the opportunity, but there's nothing else you can do.

Operator: Thank you. We have reached our allotted time for questions. I will now turn the floor back over to Angeliki Frangou for any additional or closing comments.

Angeliki Frangou: Thank you. This completes our quarterly results.

Operator: Thank you. That does conclude today's conference call. You may now disconnect.