Navios Maritime Holdings Inc. (NM-PG) Q2 2017 Earnings Call Transcript
Published at 2017-08-22 14:32:07
Angeliki Frangou - Chairman and CEO Tom Beney - SVP, Commercial Affairs George Achniotis - CFO Ioannis Karyotis - SVP, Strategic Planning
Noah Parquette - JP Morgan
Thank you for joining us for Navios Maritime Holdings Second Quarter and First Half 2017 Earnings Conference Call. With us today from the Company are Chairman and CEO, Angeliki Frangou; Chief Financial Officer, George Achniotis; SVP of Commercial Affairs, Tom Beney; and SVP of Strategic Planning, Ioannis Karyotis. As a reminder, this conference call is being webcast. To access the webcast, please go to the Investors section of Navios Maritime Holdings website at www.navios.com. You’ll see the webcast 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 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 subject to risks and uncertainties, 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 conference call with formal remarks from the management team, and after we’ll open the call to take questions. Now, I’d like to turn the call over to Navios Holdings’ Chairman and CEO, Angeliki Frangou. Angeliki?
Thank you, Laura, and good morning to all of you joining us on today’s call. Please turn to slide three, where we provide the Company highlights. Navios Holdings controls directly 64 modern dry bulk vessels and manages almost 200 vessels in its broader fleet. Fleet size creates efficiencies and purchasing power. It also allows us to develop operating leverage through proprietary processes and technical competency. As a result, our operating costs are estimated almost 40% below the average of our listed peers. Slides four and five illustrate our diversified universe of companies. Navios is a global brand with significant scale and deeply rooted industry relationships. Navios Holdings’ value derives from the dry bulk fleet it holds directly and its equity interest in other entities that own tankers, dry bulk and container vessels. Each of these entities has a strong balance sheet and healthy cash flow. To-date, the share price of Navios Holdings is above the market price of its stake in its public subsidiaries. But over time, we believe that the intrinsic value of this Company will be realized. We have two things of note to report this quarter. First, we wanted to provide an update on the status of the iron ore transshipment facility built by our South American operations. During the second quarter, Vale commenced using the terminal. Vale unloaded approximately 33,000 metric tons of iron ore to create a bed for the stockpile area and subsequently transshipped about 41,000 metric tons of iron ore. This generated approximately $0.8 million of revenue. Vale has since been building a stockpile of about 160,000 metric tons of ore. We are expecting transshipments to continue ad hoc in Q3. Beginning October of 2017, Vale’s minimum transshipment obligation under the take or pay agreement commences. As a result, we can reasonably expect revenue of about $10.3 million for the fourth quarter of this year. Second, the dry bulk market has improved and continues to improve on a daily basis. As you can see on slide six, the BDI has recovered 330% from the 2016 historical low. More importantly, the BDI still must appreciate about 83% for it to reach the 20-year average. We are observing period charters increasing materially. A Capesize vessel was just fixed for 21,000 [ph] for one year. Navios Holdings has three Capesize vessels opening in September. Slide seven details a favorable positioning. Our balance sheet is strong. We held $134.7 million in cash at the end of the second quarter. We also have no committed growth CapEx and no significant debt maturities until 2019. We diligently focus on cost management while maintaining scale so that we can enjoy industry-leading operating efficiencies. We control what we can through our essential management services whereby commercial management is done at cost and includes all sales and purchase transactions, charter transactions, financing transactions with no additional fee. We use a similar approach for technical management and administrative services. With our efforts, we decreased our G&A expenses by 52% over the past two years, based on a run rate G&A expense for the first half of 2017. Also in 2016, we created almost $40 million in estimated operating cost savings when compared with our listed peers. We recently sold two Handymax vessels for $11.8 million in net proceeds. These vessels were part of the collateral package of our secured notes, and they were replaced with a 2006-built Panamax vessel which was added to the collateral package of the notes. As I stated previously, we created Navios Maritime Containers Inc. to focus on opportunities within the container sector. Navios Containers raised $50.3 million of gross proceeds through a private placement offering on the Oslo OTC market and used this proceeds along with debt financing to acquire a 14-container vessel fleet. These vessels have a scrap value of approximately $90 million, which equates to approximately 76% of the acquisition price. Additionally, the vessels have $45 million of contracted EBITDA and $60 million of contracted revenue attached to them. As you can see, [indiscernible] characteristics were very comparative for Navios Containers, and these vessels should provide significant upside in the recovery market and then owns about 10% of the equity and has a warrant for an additional 1.7% of the equity. Slide eight shows our free cash flow upside we can capture in the recovery market. For the remaining six months of 2017, we expect our fleet open days include days with index-linked charters and profit sharing would provide incremental revenue of almost $6.5 million for every $1,000 increase in market rates. Using the 20-year average rate, we would generate about $70 million in additional revenue for the remaining six months of 2017. This represents about a $140 million in additional revenue on an annualized basis. Slide nine sets forth Navios cost structure for the second half of 2017. Our expected daily revenue is $11,795 per day. We fixed 43.3% of our available days at an average daily rate of $8,606 and revenue increases by $2,549 per day to reflect the expected impact of current market rates on our open and index days. Through this October, of $11,165, we need to add $640 daily positive effect of the NNA dividend, which brings us back to daily revenue of $11,795 per day. As to the breakeven, our cost for 2017 is expected to be $10,998 per day. Our costs include all operating expenses, scheduled drydocking expense, charter-in expenses for our charter-in fleet, G&A cash expenses, as well as interest expense and capital repayments. Slide 10 highlights our strong liquidity position. Net debt-to-book capitalization was 67.5%, and we have cash of $134.7 million and $141.2 million in total liquidity. We have no committed shipping growth CapEx or any material debt maturities until 2019. I would like now to turn the call over to Mr. Tom Beney, Navios Holdings’ Senior Vice President of Commercial Affairs. Tom?
Thank you, Angeliki. Slide 11 presents our diversified dry bulk fleet, consisting of 64 dry bulk vessels totaling 6.6 million deadweight, split between Capesize, Panamax and Supramax Handy. We continue to be one of the largest U.S. listed dry bulk operators in the world established over 60 years ago. We have 64 vessels on the water with an average age of 8.1 years. This is 8% younger than the industry average. Navios Group’s total fleet of a 181 vessels includes 47 tankers, 33 container vessels and 101 dry bulkers, and is one of the most diversified public shipping groups. Slide 12 shows about $40 million of estimated operating cost savings of Navios Holdings in 2016. To measure our efficiencies, we compared our operating cost to the published results of our peers. We computed our peers’ operating cost by reviewing their 20-Fs and related disclosures. As you can see on slide 12 our analyses show that Navios Holdings’ operating costs were estimated at approximately 40% lower than the average of the listed peers. These efficiencies translate into savings of about $40 million in 2016. We believe that these savings demonstrate the substantial competitive benefit we can generate and the value it delivers to our stakeholders. And we believe that computing our efficiencies based on actual operating results is the most persuasive way to demonstrate actual savings. Turning to slide 14. Global economic prospects worldwide are improving according to the IMF. World GDP forecasts for 2017 and 2018 are 3.5% and 3.6% respectively, suggesting accelerated dry bulk demand. Emerging market growth, predominantly in the Asian region, is the major driver with GDP growth of 4.6% in 2017 and 4.8% in 2018. Growth in advanced economies such as Europe, Japan and the USA also seems to be accelerating as industrial production turns positive. Between 2014 and 2015, dry bulk trade remained flat, with 2016 showing increase of about 1.3%. Dry bulk trade growth is set to accelerate in 2017 and is forecast to grow by 3.4%. The Chinese government has been conscientious in stimulating their economy and GDP growth. Chinese economic policy has been instrumental in supporting dry bulk trades. Increased loan initiations for housing and infrastructure supported the Chinese construction industry and steel demand. In January 2017, loan initiations from Chinese banks reached a new high, further supporting fixed asset investments, which have increased by 16% June year-to-date. Our current BDI levels of dry bulk market is about 330% above the all-time low of 290% in February 2016 with substantial upside, as it still remains 45% below the 20-year average. The recovery in dry bulk rates continues. The BDI average in the first half of 2017 was double the average in the first half of 2016. Slide 15 shows demand for iron ore. Global iron ore seaborne trade is expected to rise by 77 million metric tons or 5.5% in 2017. Since 2007, global iron ore trade has grown by 12% CAGR. China accounts for about 70% of the world’s seaborne iron ore imports. Steel production in China continues to remain very firm, up 5% year-to-date. Higher Chinese domestic demand for steel has been stimulated by large government-backed infrastructure projects and recovery in the Chinese housing market. Chinese steel exports have decreased to manage the growth in domestic demand. So, steel production in the rest of the world has to increase to cater for the shortfall, further aiding seaborne iron ore shipments. In 2016, imports of iron ore into China exceeded 1 billion tons for the first time. 2017 imports are forecasted to increase by another 7.3% or 73 million metric tons. Year-to-date, we see Chinese iron ore imports up an impressive 9%. Of note, the Brazilian exports which are forecast to grow by over 20 million tons in 2017 which will further boost ton miles. The main increases in Brazilian shipments are expected to occur in the second half of 2017, which should provide a basis for improving charter rates. Please turn to slide 16. 2016 saw the Chinese coal markets start to restructure. Domestic coal production reduced by about 9% or approximately 300 million tons, and imports of coal surged by 20% or about 40 million tons. The Chinese government continues to rationalize domestic coal production, closing down small inefficient mines and incurring consolidation of larger mining groups. It is expected that the restructuring of the Chinese coal industry will continue to encourage imports as inefficient, unsafe polluting mines are closed. Electricity consumption in China continues to rise in 2017 by about 7.5%, up to end July. Chinese thermal power generation rose by 8.2% till the end of July. With hydro production having issues with low rainfall, the demand for coal continues to rise, encouraging both an increase in domestic production and an increase in imports. Through June 2017, coal imports are up by about 16%. That trend looks likely to continue. China import is less than 10% of its annual coal consumption, but with the domestic coal price delivered to Guangzhou, about $12 a ton above import prices, the market continues to incentivize imports. Turning to slide 17. Agricultural production worldwide continues to increase. 2016 saw an increase in world trade of 21 million tons to 481 million tons. In 2017 forecasts are for a further increase of 5.1% or 24 million tons. Worldwide grain trade has grown by 5.3% CAGR since 2008, mainly driven by Asia. Demand increases are focused on Asian economies and especially China where incomes are rising. These areas tend to be further afield for major agricultural product exporters, helping ton miles which have grown by over 6% CAGR since 2009. Grain is an inefficient cargo. Loading delays due to complicated logistics and weather issues make total voyage days increase, absorbing ship capacity. The main export countries for grain tend to be Atlantic-based and the main import regions are Pacific-based. This also contributes to longer haul routes and increased ton miles. High grain demand particularly helps to Panamaxes and Supramaxes. During Q3 and into Q4, the grain harvest in the northern hemisphere will continue to fuel increases in seaborne shipments. Moving to slide 18. Up to the end of July 2017, 30.3 million deadweight of new-built vessels delivered versus an expected delivery of 45.8 million tons, maintaining a high pace of non-deliveries at 34%. As of January 1st, the 2017 order book stood at 58.1 million deadweight; using a 35% non-delivery rate for the year, it is estimated about 38 million tons will actually deliver. With about 10.1 million tons scrapped so far in 2017, net fleet growth will continue to be low. With little incentive toward the new buildings and a 15-year low in the order book at 7.5% of the fleet dry bulk fundamentals going forward should continue to improve. Turning to slide 19. 2016 ended with net fleet growth of 2.2%, the lowest percent in many years. Through July 2017, the pace of scraping has fallen as charter rates have improved. However, 10.1 million tons of scrap year-to-date maintaining the current scrapping pacing and non-deliveries, we’ll produce another net fleet growth this year. There is an increasing pool of potential scrap candidates with bulkers 20 years over representing about 7.3% of the total fleet. With new regulations regarding ballast water treatment systems and sulfur emissions restrictions coming into force, older ships will continue to scrap. We note that the current average Capesize Panamax scrap price in Bangladesh of $415 per lightweight ton is 46% higher than at the same time last year, which should encourage demolitions. Scraping can further increase for the deactivation of some of the converted VLOC vessels. There are currently 50 of these vessels over 20 years of age. However, only 47 are actually trading with three currently in layup in Malaysia. These vessels are facing increased hurdles to continue trading and we believe will be phased out over the next few years. With dry bulk demand continuing to accelerate and outpace net fleet growth, the market fundamentals look set to improve. I would now like to turn the call over to our CFO, George Achniotis for the Q2 financial results.
Thank you, Tom. Please turn to slide 20 for a review of the Navios Holdings financial highlights for the second quarter and first half of 2017. Adjusted EBITDA for quarter was $31.3 million compared to $31 million in 2016. EBITDA and net income for the quarter were adjusted to exclude $5.1 million book loss from the sale of the Navios Horizon and $4.7 million allocated loss due to the imperilment of NAA’s investment in NAP. EBITDA was positively affected by 12% increase in revenues, mainly due to an increase in both, the available days of the fleet and the time charter equivalent rate achieved in the period. EBITDA was negatively affected by a reduction in equity in net earnings from affiliated companies, mainly due to the weaker result of NAA. Adjusted EBITDA for first half of 2017 was $48.9 million compared to $61.1 million in the first half of 2016. In addition to the items that affected the Q2 EBITDA, the first half results were adjusted to exclude a 9.1 million book loss relating to the sale of the Navios Ionian. EBITDA and net income for the first half of 2016 were also adjusted to exclude $14.9 million compensation received for the earlier delivery of the Kleimar vessel from its charterer. A more reveling comparison is between Q1 and Q2 2017 revenue and EBITDA. Overall, revenue increased by $23.3 million of which $7.7 million is due to an increase in shipping revenue and $15.6 million from logistics; EBITDA over the two quarters increased by $13.8 million, $7.3 million due to the shipping and $6.5 million due to logistics. If we strip out from the shipping EBITDA the effect of the earnings from our affiliates, it’s almost a dollar for dollar increase between revenue and EBITDA in our shipping business. As the dry bulk market continues to improve, we expect a significant increase in the profitability of our business. During the quarter, we recorded an adjusted net loss of $27.4 million compared to a net loss of $26.4 million in 2016. The small reduction is mainly due to an increase in interest expense. Adjusted net loss for the first half of 2017 was $67 million compared to a net loss of $56 million in 2016. The reduction was mainly due to the reduction in EBITDA. Moving to slide 21 and our balancing highlights. On June 30th, we had about a $135 million in cash compared to $141 million at December 31, 2016. The balance does not include $6.5 million in net proceeds from the sale of Navios Horizon which was delivered in Q3. The reduction is mainly due to the completion of the construction of the port in Uruguay. This is also reflected in the increase in fixed assets and the decrease for deposits of vessels, terminals and other fixed assets. Net debt to book capitalization at the end of Q2 was 67.5% compared to 64.8% at the end of last year. The ratio is expected to decline following the completion of the port in Uruguay and the EBITDA generation from the 20-year contract with Vale. Over the next few slides, we will briefly review our subsidiaries. Please turn to slide 22. Navios Holdings owns about 21% of Navios Partners including a 2% GP interest. Navios Partners owns a fleet of 37 vessels, 30 dry bulk and seven containers. NMM also owns about 60% of Navios Containers, a growth vehicle dedicated to containers. NMM’s unique platform expected to generate significant cash flow with no significant near-term maturities. The Company’s currently in the process of renewing its dry bulk fleet with younger and lighter vessels. So far this year, it has added seven vessels with an average age of 7.4 years and it has sold one 17-year old vessel. Through this process, its dry bulk size has increased by 33% or 1 million deadweight tons. Turning to slide 23. Navios Holdings owns about 46% of Navios Acquisition. Navios Acquisition has grown to become a leading tanker company with 36 modern, high-quality vessels, with an average age of 6.5 years, diversified between crude, product and chemical tankers. All vessels are on the water generating cash flow and provide cash flow visibility as it is 94% fixed for 2017. The strategy of the Company continues to provide charters that outperform the market. In fact, for the first half of 2017, the charter rates are 51% higher than the spot market average, translating into $39 million of additional revenue when compared to the market average. NNA is also the sponsor of Navios Midstream Partners, an MLP with six VLCCs, providing a platform a diverse sector for dividend seeking investors and bringing flexibility and liquidity to NNA. NNA expects to receive about $21.3 million in distributions from Navios Midstream in 2017. It has received almost $50 million distributions from Navios Midstream since 2015. Now I will turn the call over to Ioannis Karyotis for his review of the Navios South American Logistics results.
Thank you, George. Slide 24 provides an overview of the Navios Logistics business. Navios Logistics operates three port terminals, one for grain, one for iron ore, and one for liquid cargoes. Navios Logistics complements its ports business with its barge fleet for river transportation and product tanker fleet for coastal cabotage trade. Please turn to slide 25. The new iron ore terminal is transformational for Navios Logistics. We are excited to see operations now underway and iron ore moving through the conveyer belt and loaded on to seats for export. During the second quarter, Vale commenced using the iron ore terminal, generating revenue of about $0.8 million in the quarter. Vale has since been building their stockpile, and we expect transshipments to continue ad hoc in the third quarter. Beginning in October, Vale’s minimum transshipment obligation under the take or pay agreement commences. As a result, we expect revenue of about $10.3 million for the fourth quarter of this year from the Vale port contract. Based on 4 million tons annual throughput, we expect to generate $35 million EBITDA per year. Vale also has an option to transship 2 million tons per year in addition to the minimum guaranteed quantity, which would provide an incremental expected EBITDA of another $15 million. If the terminal operated at its 10 million tons designed capacity annually, then the total expected EBITDA of the terminal would reach $85 million. The graph on the left shows the significant effects of the new terminal on Navios Logistics’ consolidated annual EBITDA. In addition, the contract includes annual tariff adjustment clauses with escalators such that it is reasonable to expect approximately $1.2 billion of cumulative EBITDA over the 20-year contract period. This is presented on the graph on the right. Please turn to slide 26. The Corumba region’s mines produce iron ore of exceptional quality. According to Wood Mackenzie, the lump ore produced in the region commands a price premium of approximately $25 per ton to the 62% sinter fines benchmark. The Corumba mines output is expected to rebound to approximately 5 million tons per annum in the short-term with a potential to increase up to 13 million to 14 million tons per annum by 2025. We believe that our newly built terminal will be the most efficient port to service export volumes from the region. Slide 27 reviews our results. Q2 2017 revenue increased 1% to $59.4 million and EBITDA decreased 7% to $19.3 million. Q2 2017 port segment revenue was 41% higher compared to the same period last year and EBITDA increased 29% to $10 million. The EBITDA increase is mainly attributable to the better performance of the grain terminal. In the Barge segment, Q2 revenue decreased 16% and EBITDA decreased 34% to $6 million. The decrease is mainly attributable to the expiration of certain long-term iron ore transportation contract during the second half of 2016. Cabotage business Q2 EBITDA was $3.3 million compared to $3.9 million in the same period last year, mainly due to lower fleet utilization. Net income in Q2 2017 was $4.4 million compared to $7.4 million net income in the same period last year, mainly due to the decrease in EBITDA, high depreciation and amortization, interest expense net and lower income tax benefit. Turning to the financial results for the six months period ending June 30, 2017. Revenue decreased 9% to $103.2 million. EBITDA decreased 30% to $29.3 million and net income amounted $1.4 million from $13 million in the same period last year, mainly due to the decrease in EBITDA. Please turn to slide 28. Navios Logistics has a strong balance sheet. Cash at the end of Q2 2017 was $62.9 million compared to $68.1 million at the end of 2016. The increase in debt reflects the $14 million bank loan that financed the $11.2 million acquisition in May of two product tranches previously under capital lease and the extinguishment of the $16.5 million capital lease obligation. Net debt to book capitalization remained at 48%, unchanged compared to the year end 2016. 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 Instructions] Your first question comes from the line of Noah Parquette of JP Morgan.
I just want to start on the iron ore first. So, you talked a little bit about the capacity that you still have remaining. Can you give us some more color on, where you’re in that process, the discussions and perhaps what kind of timing we could expect on that.
Good morning. As you know, the port is built for 10 million, the minimum guarantees for Vale, they can go up to 6 million. So, the additional 4 million capacity, we’re looking -- there is a port that -- mine approval that we’re discussing. We’re in the process. But our first priority has been to establish operation of the port, make sure that we have smooth loading of the vessel as well as unloaded [indiscernible] different operation. So, we’re in the process, it has time and structure and good contract. In order -- that mine has a capacity of going another 2 million tons. And we have also done very thorough survey by an independent company on the different mines in Corumba, their levels of -- their profitability, meaning at what level of iron ore price they will be profitable to transship, because the quality of the Corumba iron ore is of higher level and that commands higher price. So, we’ve done a lot of analysis on that and we have spent the time in order to approach all our clients and see how we can maximize the full value of the 10 million.
Okay, great. That’s really helpful. And then just broader, within a Corumba region, you note the fall off in iron ore production in past few years and the expectation that rebounds. Can you talk about why you expect that production to rebound, essentially a function of global iron ore price or is there something else going on?
One of the most important things we have to realize is that before the transshipment port, which was for only iron ore [indiscernible]. The cost of bringing the iron ore down was more expensive. So, today, we with the port facility we have, it significantly reduced the cost of the -- the cost for transporting this iron ore. Secondly, we can create a stockpile down by the [indiscernible]. And thirdly, the quality of this iron ore is of a much better quality, which means you command a much higher price. So, even today, it’s about $20, $30 additional -- I mean for any price that we have on the standard iron ore, it’s another $30 because of the higher quality. Also one consideration of quality of air and quality -- and pollution is taken into the equation. You realize that this iron ore makes far more sense.
Okay. That’s great. And then just moving on to the barge business, we saw a nice little pick-up there this quarter. What’s going on there? Have you been able to put more charter contracts on your barge fleet, and will the improvement in port transshipments help the barge business in the future?
Yes. That’s a key element that you have to realize. The barge business, yes, is weak, but the iron ore port -- we’ll have the 4 million tons down the river, that will delay the need for another 35 convoys. That absorbs quite a significant amount of the barge capacity existing. I mean, you have to realize now it only has four dedicated on iron ore. So, overall, the transshipment port will create a tightening of the conditions for river. That is historical. I mean, the river used to be 8 million ore, and last year dropped to about a 1.5 million, less than 2 million. So, you realize that backup [ph] creates quite -- it absorbs capacity.
Okay. That’s really helpful. And this is one final question on cabotage. Again, nice rebound here. Can you talk a little about what was causing the low utilization the past few quarters and what happened this quarter that was different?
Q1 is seasonally lower quarter and that we explained in the first quarter. We also had drydock and we had [indiscernible] because we had off-hires [ph] because we had significant repairs in one of the vessels. So, we have -- we didn’t have these events this quarter; this improved the utilization quarter-on-quarter.
Your next question comes from the line of Chris Wetherbee of Citigroup.
Hi. Good morning. This is Prashant on for Chris I wanted to just ask about the barge business there. So, just thinking in the sense of how much upside there could be as there’s more volume and capacity we take in as the port terminals ramp up. How should we think about the EBITDA upside? And then, just as a reminder, the contract that expires in 2016, how much capacity did that contract take up in 2016 that freed up this year, just so we can get a rough sense of what the math would look like?
I will let Ioannis go through the details but I want to go first on the barge business. Barge business in 2017 will get a minimum guarantee of ports which inevitably grow high, because you’ll have tighter conditions. The other macro level I’d like to give you a view is as ports become a more prominent part of our business and then more substantial. If you perform the minimum guarantee of 35 million EBITDA of Vale, you will come on the -- let’s say of the 95 million, you’ll have about 65 million just on ports. So the barge and cabotage business will be much smaller percentage of our overall business. Just to realize that now we have to make logistics, it will be almost two-thirds ports.
Regarding the convoys that we are under long-term iron ore contracts, we had nine convoys that were under long-term iron ore contracts as that expired in 2016 and we have another four that continue until 2020.
Okay, four till 2020. Okay, thanks. That’s very helpful. And then understanding that the EBITDA generation from cabotage is going to be a smaller percentage, as you ramp up with the port percentage and then sell. I just wanted to ask one small question. I understood you’re getting refining river tanker in the first half. I just wanted to talk a little about the energy business. You’ve talked about iron ore and grain movements in South America. But are there any -- is there any sort of headwind that’s -- just sort of wanted to get some color actually just on the refining, refined product environment and whether or not you are seeing some sort of a pickup in movement of those products that should help the cabotage business in the back half or in 2018?
As you know, in our ports, we have developed about a little bit more than half our land. [Ph] We can easily -- we see potential and we have seen in Argentina how it’s developing and overall river system is important. And we see that long term can become an area where we can expand our port facility. And we have sufficient land. We have a little bit less than half of the land to develop that and we can also use that [ph] which was – has sufficient areas where we can use. So that is an area we are looking and we think there will be potential for further growth on our port segment.
Thank you. I will now return the call to Ms. Angeliki Frangou for any final remarks.
Thank you. This completes our Q2 results.
Thank you for participating in today’s conference call. You may now disconnect.