Navios Maritime Partners L.P. Q4 FY2021 Earnings Call

Thank you for joining us for Navios Maritime Partners Fourth Quarter and Full Year 2021 Earnings Conference Call. With us today from the company are Chairwoman and CEO, Ms. Angeliki Frangou; Chief Operating Officer, Mr. Stratos Desypris; Chief Financial Officer, Ms. Eri Tsironi; 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 will also be found there. Now I will 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 risks and uncertainties, which could cause actual results to differ materially from the forward-looking statements. Such risks are more fully discussed in Navios Partners filings with the Securities and Exchange Commission. The information set forth herein should be understood in light of such risks. Navios Partners does not assume any obligation to update the information contained in this conference call. The agenda for today's call is as follows. First, Ms. Frangou will offer opening remarks. Next, Mr. Desypris will provide a Navios Partners operational and fleet update overview. Next, Ms. Tsironi will give an overview of Navios Partners financial results. Then Mr. Achniotis will provide an industry overview. And lastly, we'll open the call to take questions. Now I turn the call over to Navios Partners Chairwoman and CEO; Ms. Angeliki Frangou. Angeliki?

Thank you, Daniella, and good morning to all of you joining us on today's call. I am pleased with our outstanding results for the fourth quarter and full year of 2021. During Q4, Navios Partners recorded revenue of $268.1 million, adjusted EBITDA of $156.6 million, adjusted net income of $121.8 million. And for the full year of 2021, Navios Partners recorded revenue of $713.2 million, adjusted EBITDA of $426.5 million and adjusted net income of $364.1 million. Please turn to Slide 3. In 2021, we reimagined what a public shipping company could be like and took actions to make this a reality. Today, Navios Partners is not only one of the leading U.S. publicly listed companies based on the number of vessels, but is also diversified across 15 vessel types in 3 segments, servicing more than 10 end markets. About one-third of our fleet operates in each dry bulk, container ship, and tanker segments. We will discuss why we believe that this new structure offers a stronger, more resilient entity. Slide 4 presents some recent segment data. Navios Partners fleet of 146 vessels has an average age of 9.6 years and a loan-to-value of 32.5%. We have built $2.7 billion in contracted revenue, of which $2.2 billion is from the container sector. Of approximately 47,000 available days, almost half are exposed to market rates. This provided upside through recovering charter rates in the dry bulk and tanker market, which we expect in the near term. Slide 5 summarizes the basic principles behind the strength of our diversified platform. Number one, a diversified platform allows us to optimize our chartering strategy. Fundamentally, this means that we can consider long-term charters in segments that offer attractive returns while allowing vessels in underperforming segments to be chartered for short term or at index rates. Diversification allows the benefit of managing a chartering policy to our advantage without any balance sheet compulsion. Number two, the segments have some countercyclicality building. This creates the opportunity of redeploying the strong cash flow from performing segments into asset purchases in underperforming segments where we believe attractive acquisition opportunities exist. Ultimately, we believe that this allows for optimal capital allocation. Number three, asset values themselves can be volatile. We have seen a significant appreciation in the container sector recently and have lived through significant depreciation of asset values in the past. We expect this will continue. Leverage rates can remain low or, if asset values cooperate, we believe that by diversifying our asset base, the balance sheet impact of asset value volatility will be muted. Consequently, our balance sheet strength will be generating the impact from this diversity of assets. Together, the diversification creates a resiliency in the overall business model. Each segment works independently to mitigate volatility from the other segments. While we don't expect this to work perfectly, we think that it will reduce volatilities efficiently to allow us the latitude to leverage market opportunity because the overall structure is inherently more stable. We will have flexibility in our operational and financial activities and decision-making process as we charter, sell and purchase vessels and obtain debt finance within this context. We believe that the net result is that we should have more predictable entity-level returns. On Slide 6, we've drilled down into how we optimize our chartering. As you can see from the chart on the top right, the Container segment is enjoying historically high charter rates. Operating in this backdrop, we have opted to fix our Container fleet on long-term charters, with almost 100% of our available containership days fixed for 2022. This reduces market and residual risk for these vessels. We manage the credit risk of our long-term charters independently to ensure that we are not simply trading one risk for another. In our Dry Bulk segment, we benefit from a market where rates are recovering to their historical 20-year averages. We have fixed only 24% of our available Dry Bulk fleet base for 2022 and have opted to give 76% of our 2022 available days exposed to market rates to capture any available upside. Our chartering strategy also allows us to fix our Dry Bulk fleet on long-term charters when rates do improve. Lastly, within Tankers, current charter rates are 80% below their 20-year average levels. We have 46.8% of our 2022 available Tanker days fixed, many with favorable legacy charters. We anticipate running this fleet on market rates until we see some healthier rates that will allow us to consider other options. We expect our Tanker fleet will generate strong returns once the market recovers. It can't help but to observe that we will have the luxury of patiently awaiting the recovery given the strength of our other segments. Slide 7 details our approach to capturing the unique opportunity of each segment. Navios made a $1 billion investment in 18 newbuilding vessels that will deliver to our fleet through 2024. Of this acquisition, we used the gathering strength of the Container market to acquire 10 container ships. We hedged our financial investment by entering into long-term credit-worthy charters for these vessels. We also engaged in the routine and continuous management of our fleet age profile in the Dry Bulk and Tanker space. Seven dry bulk vessels and one VLCC were acquired at prices below their long-term averages. In our Containership segment, we renewed our fleet by acquiring 10 5,300 TEU newbuilding containerships for approximately $620 million. The current market value of these vessels is estimated at $720 million. These 10 containerships will earn about $710 million in contracted revenue for the 5.2 years duration of the related charters. We also capitalized on the strength in containership values by selling 2 16-year-old vessels for $220 million. The sale was executed at historically high values and is expected to be completed in the second half of 2022. Moving on to our Dry Bulk segment. Fleet expansion was executed at attractive prices. And as you can see, Navios Partners' $332 million investment in 7 newbuilding vessels ordered when vessel values were challenged in the first half of 2021 is worth approximately $372 million to date. Lastly, for the Tanker segment, we are seeing a dichotomy in asset values versus charter rates, whereby values anticipate a recovering charter rate market. In fact, our newbuilding VLCC vessel has already appreciated 36%. Slide 8 lays out how Navios Partners intends to counter volatility existing in specific segments. Navios Partners' diversified asset portfolio provides balance sheet stability from the idiosyncrasies of specific sectors. As you can see from the chart on the slide, Navios Partners fleet in aggregate is currently valued at approximately $5.2 billion. While containership values are at a historical high, Dry Bulk vessel values are only 25% of their all-time high, and Tanker values are about 40% of their all-time highs. This variation in asset values balances out through our diversified segment and results in a 32.5% loan to value for Navios Partners on December 31, 2021. As you can also see from the chart to the bottom left, Navios Partners has about $3.5 billion in net equity value in these vessels. Slide 9 reviews our recent developments. During the fourth quarter, Navios Partners generated $268.1 million in revenue, $156.6 million in adjusted EBITDA, and $121.8 million in adjusted net income. For the full year of 2021, Navios Partners generated $713.2 million in revenue, $426.5 million in adjusted EBITDA, and $364.1 million in adjusted net income. The P&L is healthy, and Navios Partners balance sheet remains strong. As of December 31, 2021, we have about $170 million in cash. The size of our balance sheet cash has a number of considerations, including capital commitment for new vessels and working capital for the fleet. Consequently, I will expect that we will hold considerably more than our current cash balance. Considering only working capital for our fleet size, we estimate an approximate cash balance would be about $2 million per vessel. Leverage is 32.5% LPV as of December 31, 2021, and we have a target debt maturity profile. As an update to our S&P activity since the fourth quarter of 2021, we agreed to acquire 5,300 TEU newbuilding containerships, with the deliveries expected in 2024 for $251.3 million; 2 16-year-old containerships for $220 million, with a closing expected in the second half of 2022. An update to our chartering activity. We secured new long-term charters for 11 of our containerships that we expect to generate $670 million in revenue as follows. About $290 million through the 4 5,300 TEU newbuildings containerships chartered out for an average period of 5.3 years at an average net rate of $37,282 per day and about $380 million to 7 $2,750 to 4,250 TEU containerships chartered out for an average period of 3.3 years at an average net rate of $45,927 per day. We continue to take advantage of a robust market. Navios Partners had $2.7 billion in contracted revenue. For 2022, our contracted revenue already exceeds forecasted expenses by almost $50 million. Moreover, out of 46,905 available days, 21,966 of these days are exposed to market rates, allowing for significant potential cash flow generation. At this point, I would like to turn the call over to Mr. Stratos Desypris, who will take you through the next few slides. Stratos?

Thank you, Angeliki, and good morning all. Navios Partners is differentiated by significant leading scale and diversified sector exposure. Slide 10 details our strong operating free cash flow potential. Currently, we have contracted 53.2%, or about 47,000 available days, at an average rate of $20,957 net per day. For 2022, our contracted revenue exceeds total cash expenses by almost $50 million, and we still have about 22,000 days with market exposure that can provide additional operating cash. The majority of our market exposure comes from our dry bulk vessels where we will have fixed approximately 24% of our available days. On Slide 11, you can see our fleet profile. 2021 was a transformational year for Navios Partners. Our fleet increased by 170% by entering into new segments and expanding our presence in the segments we were already operating. More specifically, we increased our dry bulk fleet capacity by 36% and our containerships by 370%. Additionally, we entered into the Tanker segment by acquiring a 45-vessel tanker fleet. We have also been very active in renewing our fleet and reducing its average age. Since 2020, we have reduced the average age of our dry bulk fleet by 18% and our containerships by 31%. The renewal process required some balancing efforts. We'd like to be proactive and capture cyclical opportunities while allocating capital. As you can see at the bottom of the slide, we have 21 vessels that are over 15 years of age, while, at the same time, we have 18 newbuilding vessels to be delivered from the third quarter of 2022 through 2024. Turning to Slide 12. You can see some recent updates. We continue to secure long-term employment for our containerships, and we have fixed 11 vessels, creating approximately $670 million in contracted revenue. More specifically, we have contracted 4 newbuilding containerships delivering in 2024 for over 5 years with an average rate of $37,282 net per day, generating about $290 million of contracted revenue. These vessels were acquired for an aggregate purchase price of $251.3 million. We have also chartered our 7 containerships for periods between 3 and 3.8 years, generating revenues of approximately $380 million. These charters represent a 2.8x increase compared to the current contracted rates of these vessels. On the S&P front, we capitalized on the strength of the containership by values by selling 2 16-year-old 8,200 TEU containerships for $220 million. The sale was executed at historically high prices and is expected to be completed in the second half of 2022. We have also completed the sale of a 2006 Panamax vessel for $14 million. We are constantly working on refinancing and extending maturities. We have completed our second sustainability linked financing, demonstrating our commitment to our ESG principles. Additionally, we're in advanced discussions for a new $55 million facility for the refinancing for 2 existing facilities. On Slide 13, you can see the breakdown of our $2.7 billion contracted revenue. About $1.2 billion or 45% of our contracted revenue will end in 2022 and 2023. 81% of our contract revenue comes from our containerships, with charters extending through 2030 with a diverse group of quality counterparties.

Thank you, Stratos, and good morning, all. I will briefly review our unaudited financial results for the fourth quarter and the full year ended December 31, 2021. The financial information is included in the press release and is summarized in the slide presentation available on the company's website. Upon completion of the merger with Navios Maritime Containers L.P. on March 31, 2021, and obtaining control of Navios Maritime Acquisition Corporation on August 25, 2021, the results of operation of these companies are included in Navios Partners consolidated statement of operations. On October 15, 2021, Navios Partners completed its merger with Navios Acquisition. I would like also to highlight that 2021 results are not comparable to 2020. And in 2021, Navios Partners acquired 2 companies and increased its available days by 83% to 31,884 compared to 17,430 for the previous year. Moving to the earnings highlights on Slide 14. Total revenue for the fourth quarter of 2021 was $268.1 million compared to $69.2 million for the same period last year due to the expansion of our fleet and the improved time charter equivalent rates for both containers and bulkers. The available days in Q4 2021 increased by 136.5% to 11,363 days compared to 4,805 for the same period in 2020. Our time charter equivalent rate increased by 64.1% to $23,005 per day compared to $14,021 per day for the same period in 2020. The average Q4 2021 time charter equivalent achieved by sector was: bulkers, $29,548 per day; containers, $23,765 per day; and tankers, $15,426 per day. EBITDA and net income for Q4 2021 include a $3.3 million gain related to a sale of 1 vessel and a $7.6 million of transaction cost in relation to the merger. Excluding these items, adjusted EBITDA increased by approximately $1.1 million to $156.6 million for the 3-month period ending December 31, 2021, compared to $35.5 million for the same period in 2020. The increase in adjusted EBITDA was primarily due to a $198.9 million increase in time charters and voyage revenues and a $1.1 million increase in net loss attributable to noncontrolling interest. The above increase was partially mitigated by a $47.5 million increase in vessel operating expenses; an $18.9 million increase in time charter and voyage expenses; an $8.5 million increase in general administrative expenses; a $6.3 million increase in direct vessel expenses, excluding the amortization of deferred dry dock special survey cost and other capitalized items; a $2.2 million increase in other income; and a $0.5 million decrease in equity net earnings of affiliated companies. The above increases in expenses were mainly due to the expansion of our fleet. Total adjusted net income amounted to $121.8 million compared to the 3-month period ended December 31, 2020. The increase in adjusted net income was primarily due to a $121.1 million increase in adjusted EBITDA and a $30.9 million increase in amortization of the favorable lease terms. The above increase was partially mitigated by a $30.9 million increase in depreciation and amortization expenses; a $9.6 million increase in interest expense and finance cost net; a $2.4 million increase in amortization of deferred dry dock special survey cost and other capitalized items; and a $0.1 million decrease in interest income. Moving to the 12 months 2021 period. Time charter revenue reached $713.2 million compared to $226.8 million in 2020. The result was a combination of the expansion of our fleet and the improved time charter equivalent rates. As mentioned earlier, available days increased by 83%, while our fleet time charter equivalent rate increased by 73.7% to $21,709 per day compared to $12,497 per day for the same period in 2020. The average 2021 time charter equivalent rate achieved by sector was: bulkers, $23,331 per day; containers, $22,435 per day; and tankers, $15,336 per day. Fleet utilization was approximately 99%. EBITDA and net income in 2021 include an $80.8 million gain in equity net earnings of affiliated companies; a $48 million bargain gain upon obtaining control of Navios Acquisition and upon completion of the NMCI merger; a $33.6 million gain related to the sale of 8 of our vessels; and a $10.4 million of transaction cost in relation to NMCI and NMA merger. Excluding these items, adjusted EBITDA increased by $326.7 million to $426.5 million in 2021 compared to $99.8 million in 2020. The increase in adjusted EBITDA was primarily due to a $486.4 million increase in time charter and voyage expenses and a $4.9 million increase in net loss attributable to noncontrolling interest. The above increase was partially mitigated by $97.7 million increase in vessel operating expenses; a $25.1 million increase in time charter and voyage expenses; a $17.5 million increase in general and administrative expenses; a $13 million increase in direct vessel expenses, excluding the amortization of deferred dry dock special survey cost and other capitalized items net; a $10.2 million increase in other expenses net; and a $1.1 million decrease in equity and net earnings in affiliated companies. The above increases in expenses were mainly due to the expansion of our fleet. Net income for 2021 exceeded $0.5 billion whereas on an adjusted basis, it reached $364.1 million compared to $9.9 million for the year ended December 31, 2020. The increase in adjusted net income was primarily due to a $326.7 million increase in adjusted EBITDA; a $108.5 million increase in amortization of favorable lease terms recorded in the year ended December 31, 2021; and a $0.3 million increase in interest income. The above increase was partially mitigated by $56.7 million increase in depreciation and amortization expense; an $18.6 million increase in interest expense and finance cost net; and a $6 million increase in amortization of deferred dry dock special survey cost and other capitalized items. Turning to Slide 15. I will briefly discuss some key balance sheet data. As of December 31, 2021, cash and cash equivalents were $169 million. Long-term borrowings, including the current portion, net of deferred fees amounted to $1.36 billion. Net debt to book capitalization was at the comfortable level of 38%. Slide 16 highlights our balance sheet strength. Our debt is 3.5x covered by the value of our fleet based on publicly available valuations. Following the completion of the new $55 million facility mentioned earlier, we will have minimal debt maturities in 2022, while our current maturity profile is staggered with no significant value due in any single year. Turning to Slide 17. You can see our ESG initiatives. Maritime shipping is the most environmentally friendly means of transportation, as it is the most carbon efficient mode of transport. We aspire to have zero emissions by 2050. In this process, we have been pioneering and are adopting certain environmental regulations up to 2 years in advance, aiming to be one of the first fleets to achieve full compliance. Navios is a socially conscious group whose core values include diversity, inclusion, and safety. We have very strong corporate governance and a clear code of ethics. Our Board is composed of majority Independent Directors and independent committees that oversee our management and operations.

Thank you, Eri. Please turn to Slide 20 for the review of the dry bulk industry. The IMF projects global GDP growth at 4.4% for 2022, led by a 5.9% expansion in China, India, and developing Asia. 2022 dry bulk trade is projected to increase by 2%. Similar to last year, most of the increase is expected to happen in the second half of the year. Rates in all asset classes reached 10-year highs in 2021, reflecting strong demand for bulk commodities, aided by fleet inefficiencies due to the pandemic. The BDI peaked at 5,650 on October 7, the highest level since 2008. The market then retreated on the back of Chinese winter steel production limits and a surprising temporary ban on Indonesian coal exports. The BDI continued to retreat at the start of 2022, falling back below 1,500 for the first time in 12 months. However, recent efforts by the Chinese government to stimulate the economy and the expectation of increased steel production, along with the commencement of the South American grain export season, should provide the market a boost. Turning to Slide 21. Post-pandemic stimulus measures in the advanced economies and increasing industrial protection have fueled demand for the 3 major bulk cargoes. Specifically, seaborne iron ore trade is expected to increase by 1.2% in 2022, with second half '22 imports increasing 8.7% over the first half, as reduced pollution restrictions allow an increase in Chinese steel production. Gas prices have exceeded coal pricing since August 2021, and the trend is expected to continue. In spite of stated goals of carbon neutrality, the gas price surge has driven power plants to switch back to coal-fired power generation. Accordingly, seaborne coal imports are expected to grow by 2.4% in '22, with the same seasonal pattern as iron ore inflation. The second-half '22 coal demand is expected to grow by 8.2% over the first half. On the grain side, the global grain trade continues to be supported by an ever-increasing world population, food security issues driven by the pandemic, as well as increasing protein demand worldwide. Whole grain production for the 2021-22 crop year will reach a record according to the USDA. Global grain trade has been growing by about 5% CAGR since 2008 mainly driven by Asian demand. Please turn to Slide 22. The current order book stands at 6.7% of the fleet, one of the lowest on record. Net fleet growth for 2022 is expected at only 2%. Vessels over 20 years of age are about 8.5% of the total fleet, which compares favorably with a historically low order book. In concluding our dry bulk sector view, strong demand for natural resources, combined with continued COVID-related logistical disruptions and a slowing pace of newbuilding deliveries will support healthier trade rates. Fleet growth is expected to decline further in 2023 as owners remove tonnage that will be uneconomic as the IMO 2023 CO2 rules come into force. Please turn to Slide 24, focusing on the container industry. Demand for goods in the U.S. and Europe continues to rise in the latter part of 2021, increasing both container trade and supply chain bottlenecks. At the start of 2022, freight rates are at or near record levels, allowing us to lock in long-term contracts at historically high rates. As you can see in the blue box on the lower right, increases in demand for goods, port congestion, and the restocking led to containership demand growth of 6.1% in 2021, with further growth of 3.8% expected in 2022. Turning to Slide 25. Net fleet growth is expected to be 3.6% for 2022. Even with the increase in newbuilding orders, we managed our forecast to outpace net fleet growth. It should be noted that about 72% of the order book is for 13,000 TEU vessels or larger. In addition, 10.3% of the fleet is currently 20 years of age or older. In conclusion, positive demand fundamentals, mainly due to the change in consumer purchasing patterns and resulting supply chain bottlenecks, along with reduced fleet availability, should continue to support the containerized shipping industry in 2022. Please turn now to Slide 27 for the review of the tanker industry. Global oil consumption is recovering, although with modest growth due to the continued pandemic disruptions. However, OPEC+ continues to increase supply by 400,000 barrels per day on a monthly basis until midyear when oil production cuts are eliminated. The IEA projects oil demand to exceed pre-pandemic levels by Q3 '22, as recovery in the travel industry spares additional fuel consumption. There is an approximate 90% correlation of world oil demand with global GDP growth, and about 2/3 of seaborne product paid is related to transportation. Turning to Slide 28. VLCC net fleet growth is projected at only 1.8% for 2022. This decline can be partially attributable to owners' hesitancy to order expensive long-lived assets in light of macroeconomic uncertainty and engine technology concerns due to upcoming CO2 restrictions. The current order book is only 7.5% of the fleet. Vessels over 20 years of age are 11.1% of the total fleet, which compares favorably with the low order book. Finally, turn to Slide 29. Product tanker net fleet growth is projected at only 0.6% for 2022. The current product tanker order book is 5.2% of the fleet, one of the lowest on record, and it compares favorably with the 7.8% of the fleet, which is 20 years of age or older. We believe that the overall tanker order book and fleet are well balanced, as the IMO 2023 and ballast water management regulations will lead to some vessel retirements in the coming months. In concluding, the tanker market continues to remain challenged in Q1. However, the combination of global oil demand returning to pre-pandemic levels by midyear, OPEC+ increasing production, OECD inventories returning below their 5-year average, and the lowest order book in 3 decades should provide for healthy tanker earnings in the near term. This concludes my presentation. I would now like to turn the call over to Angeliki for her final comments.

Thank you, George. This completes the formal presentation, and we'll open the call to questions.

We'll take our first question from Randy Giveans of Jefferies.

So you've been fairly active as both a buyer and a seller here in the container S&P market. How do you view your tanker and dry bulk fleets? And how do you balance buying new assets and selling some of those older ones?

Thank you for the question, Randy. This quarter marks the first time we are operating as a diversified company, and we are focused on creating value. We've capitalized on the container sector by purchasing new vessels and hedging, which has led to cash flows with no residual value risk, along with young assets generating over $2.2 billion in cash flow over the next 5 to 7 years. In the dry bulk sector, we have a strong fleet and are optimistic about the market's recovery, with 75% market exposure. While Q1 tends to be seasonally low, we anticipate a robust market for the rest of the year. If our returns mirror last year's, we could see significant cash flows. Thanks to our contracted container fleet, we can enter the spot market with our expenses covered, leading to a positive outcome of $50 million. The tanker segment is particularly valuable; historically, this type of fleet can generate over $200 million in EBITDA during prosperous years. It's important to note that factors like Omicron have impacted the tanker recovery, but now we are positioned to benefit from both sectors. Ultimately, our goal is to drive net asset value, which will positively influence our stock price.

Got it. All right. That makes sense. And now I guess the most important question, right? Your revenue backlog is massive. EBITDA is going to exceed, I don't know, $600 million, could be closer to $700 million, both this year and next. However, your current distribution is about 1% of that, right, $6 million on an annual basis. So when should we expect to see an increase in the distribution? And then secondly, as you mentioned, NAV accretion, right? Your NAV is north of $60, probably closer to $80. However, your shares are trading at $30. So why not repurchase units at these levels?

We are actively working on generating net asset value, which is driven by our own initiatives rather than market fluctuations. You have witnessed our efforts over the past year, and I am pleased to say our stock price has been the top performer over that time not only in terms of price but also total returns compared to our peers. This process is ongoing, and it's crucial to leverage various segments. We focused on the container segment, where we generated cash flows, acquired vessels at favorable prices, and sold historical assets. We are committed to expanding our cash flows, which we believe will positively affect our stock price. We have sufficient working capital and capital expenditures for investment. Our strategy is not merely about growing in numbers, such as the number of vessels, but about achieving attractive cash flow returns. If we cannot find favorable returns, we will consider a different strategy like buybacks. Currently, we have a fleet of approximately 145 vessels, each requiring around $2 million in working capital. Our investment CapEx has been detailed in several slides, and we are generating appealing cash flows and returns, as evidenced by our newbuilding efforts, which translate into actual cash flows. This is the direction we are pursuing.

We'll take our next question from Omar Nokta of Clarkson Securities.

Yes. I just wanted to ask about where you've been fairly active here recently. On the container side, first off, just want to double-check. In your last quarterly report, if I recall, you mentioned having taken your newbuilding order book for the 5,300 TEUs to 6 ships, and those are fully chartered. I just want to confirm that, that order is now up to 10 ships as of today, also fully contracted. Is that correct?

Yes, Omar. In the previous call, I didn't think it would be very possible to extend, but we managed to exercise options and fully hedge that position at even better rates with no residual value risk. Now we have a fleet of 10, which allows us to also replace our fleet, addressing an important issue regarding the average age of our vessels. We have successfully reduced the average age compared to the industry.

Right. Yes. I mean, definitely a unique opportunity to order these vessels against long-term charters that, as you say, basically remove the residual risk at the end of the contract. And just maybe, generally, in terms of where the market is today for further newbuildings and your appetite, could you maybe just give us some color? Because liners last year were quite active securing long-term charters against newbuildings for large and midsized ships. That seems to maybe have slowed recently, but there really is now a big focus on chartering what's available again in the market today, as you've highlighted here in your report today. Can you maybe give just some color on what you're seeing from this point on, on the newbuilding front? Are there still opportunities like the one that you've done here on the 5300s? Is there still an appetite for that? Are liners looking for that vessel class now in larger numbers? Or are they still kind of fixated on the bigger size? Or is it kind of maybe just quieted overall? Any color you can give on that front?

I will never say never because, based on what I learned last quarter, there are always opportunities and varying needs among liners. We have noticed that they want vessels delivered as soon as possible, which was evident in the historic sale we made of $220 million for 16-year-old vessels that we will be delivering in the second half. Essentially, liners want to secure vessels quickly, and the alliances will operate in different segments. Some prefer ownership, while others opt for charters, leading to various models for different liners. There is a strength evident in this market. Of course, at some point, we must acknowledge that the pandemic will ease, and opportunities like this may diminish. However, the current situation appears very strong. Just consider the value of the two vessels we sold, which had a market cap exceeding that of our last year in Q4 of 2020. This illustrates the potential of the current situation. I believe that newbuildings will become less of an issue moving forward, as there are more vessels actively in service right now.

Okay. And maybe just a follow-up and maybe just kind of speaks to the reimagined public shipping company, at least in Navios' case with the diversification strategy. Speaking of the 8,200 TEU ships that you've sold, of $220 million, that cash starts to come in the second half. How should we think about where that capital will be redeployed? I know you touched on that in your opening comments, and I think in response to Randy's question. But as you think about that capital and maybe future sales on the older side, as you kind of replace with the new builds, where do you think right now you want to put that capital? Does that roll into tankers and taking advantage of a depressed environment there? Is that where you see the opportunity at the moment to invest excess cash?

I believe the strength of diversification lies in its application across various sectors, depending on market opportunities. For instance, regarding newbuildings in the Container segment, we are not looking to make speculative orders because it is not a wise approach. The Container sector is currently at an all-time high, which makes it a very risky venture. However, the advantage is that we can focus on dry bulk and tankers, which are driven solely by opportunity. It’s about finding situations where we can secure significant upside or overall returns. This is our preferred strategy.

And we'll move next to Chris Wetherbee of Citigroup.

This is Eli Winski on for Chris. Maybe we can just go back to the sales on the containership side. So 10.3% of the containerships are over 20 years old. You guys just sold 2 of them, about 16 years old. Just curious if you guys have any more appetite for sales in containership and, then going off of that, if further sales there would help play into the strategy of fuel efficiency regulation.

These vessels are not leaving the new sector. Navios is taking advantage of opportunities in this segment, and we are performing strongly. We will either sell a vessel or charter it at a rate that provides a better return. This decision is made while considering cash flows and the creditworthiness of the counterparties. We focus on securing positions for the long term, which is how we manage our portfolio. Additionally, we are acquiring newer generation, fuel-efficient vessels in our newbuilding strategy. Transitioning from older vessels to younger ones is beneficial for us, and we strive to do this continuously. This is an ongoing process, and as you can see in our presentations, we currently have 18 newbuildings that are in close proximity to vessels that are 15 to 20 years old, indicating that we are actively pursuing this strategy.

That makes sense. And then I just need to ask about congestion. You guys talked about it at the top of the call, but just digging in. On the West Coast U.S., we've seen ships move downwards off the coast. Ships in transit from Asia over seems to be relatively steady. Do you think we could have reached an inflection downwards? Or is there something else that we're not thinking of right now on that side from Asia to the U.S.?

I believe that Omicron has brought in experts who can explain the flow of shipping vessels. As noted by the Wall Street Journal, shipping is at the forefront of significant congestion, something that is on everyone's mind. There is certainly a lot of information available on this. It's crucial to consider that in January, we experienced an Omicron outbreak that resulted in more sick individuals globally than during the Spanish flu era, which significantly delayed operations. We anticipate a strong demand for containers, and this has prolonged the transition from product consumption to services. This trend is definitely occurring alongside various geopolitical issues.

And this does conclude our question-and-answer session for today. I'd be happy to return the call to Angeliki for any concluding remarks.

Thank you. This completes our Q4 results. Thank you.

This does conclude our conference for today. You may disconnect your lines. And everyone, have a great day.