Dry Shippers across the board have been predicting a fantastic 2014. Navios Maritime Holdings (NYSE:NM) is the last among shippers to provide industry insight into next year and beyond. In such a fast-changing environment, paying attention to the most recent, up-to-date info can give you the best edge over the crowd.
Navios Maritime Holdings generates revenue from both dry bulk shipping and logistics. It reported its third-quarter results on Nov. 25. Its revenue and earnings before interest, taxes, depreciation, and amortization, or EBITDA, were strong as expected. Revenue was $122.3 million, and EBITDA came in at $40.6 million.
CEO Angeliki Frangou called it a "solid quarter" and declared a $0.06-per-share dividend for a 3.1% yield. This means she's putting the company's money where her mouth is, providing the company's first clue about its confidence in the future.
The conference call echoed other dry shippers' strong optimistic sentiments. President Ted Petrone reminded everybody that rates are currently below their historical average. He predicted that rates will go up, in part due to slowing supply growth of ships and increased exporting of iron ore, coal, and grain, mostly to China and India. He also expects 2013 to prove to be one of the highest years on record for the scrapping of old ships, which will further reduce shipping supply.
Petrone is calling for demand growth to overtake supply for the first time in four years. If he's correct, this would be significant for all dry shippers. Four years ago, rates were double to triple what they were in the third quarter. When rates rise, that extra revenue tends to fall straight to the bottom line as net income and cash flow.
CFO George Achniotis toed the party line by stating, "We are in the low point in the cycle." This suggests he's calling for a bottom and expects rates to go up from here.
During the Q&A, Frangou continued to beam with confidence, saying, "The overall trend is upwards ... The fundamentals are good."
Comments from earlier calls
Navios Maritime Holdings owns 21.6% of Navios Maritime Partners (NYSE:NMM). As such, Navios Maritime Partners is considered a subsidiary and has the same CEO. The company reported its results on Halloween, and it's interesting to note how the tone has changed, if at all, over the last three and a half weeks.
Frangou stated back then that the company is ready and willing to increase dividends as the market improves. As she noted, "The dry bulk environment has brightened significantly." Frangou pointed out the excessive amount of scrapping coupled with slower order growth in new ships will improve the rate environment in 2014 and beyond. Both calls were very consistent with each other in detail, though the most recent one had an aura of even greater confidence.
Diana Shipping (NYSE:DSX) also reported recently, on Nov. 19. Though the company took a slightly more cautious tone, it was also very bullish about 2014 and beyond. President Anastasios Margaronis said the just-concluded period was one of the most exciting quarters in four years.
While the company did warn that the industry is at the mercy of demand from China, it does feel the industry is in the "lower parts of the cycle." Diana Shipping expects iron ore shipments to China to increase by 9% in 2014.
Foolish final thoughts
As we get closer to 2014, keep a laser focus on shipping rates. No other metric even comes close to determining the fortunes – or lack thereof – for all of the major dry shippers. If shipping rates improve as much as these companies believe they will, you might see a lot of dry shipping companies making some big bucks.
Nickey Friedman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.