Why Navios Holdings’ low cost structure benefits the company

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Oct. 7 2014, Updated 8:00 a.m. ET

Management speaks

Announcing the company’s second quarter earnings, Navios Maritime Holdings (NM) chairwoman and chief executive Angeliki Frangou once again commented that the company has created a significant competitive advantage through its in-house technical and commercial management.

Low cost

These skills have reduced NM’s daily operating expenses by 34% to $3,698 average per vessel. These expenses are below the industry average of $5,626. Frangou has also managed the company’s general and administrative expenses so that they’re below NM’s public peers.

As we mentioned earlier, for 2014, NM has fixed 85% of its vessel available days at an average contracted daily charter-out rate of $12,621. This rate is marginally below its fully loaded cost of $13,159 per day, but $20,966 is fixed for 2015.

Low-cost structure

Navios is, to an extent, unique among its peers such as Diana Shipping Inc. (DSX), DryShips Inc. (DRYS), Safe Bulkers Inc. (SB), and Navios Maritime Partners LP (NMM). NM has developed scale and world-class talent that attend to its business in every department.

The company believes that it has a significant operating benefit from nurturing this skill internally, making better decisions regarding the daily operations and maintenance of its vessels.

The Navios group overall

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With operating subsidiaries that have technical expertise in different areas of shipping, Navios Holdings reports lower costs than the industry average, supported by economies of scale. Navios Maritime Partners’ (NMM) combined dry and container fleet reported average per-vessel costs of $5,712 compared to the $7,261 industry average. Meanwhile, Navios Maritime Acquisition recorded 17% lower average costs of $7,781 per vessel for its combined tanker fleet compared to an industry average cost of $9,334 per vessel.

The Guggenheim Shipping ETF (SEA) tracks the performance of shipping companies.

We’ll now see how Navios South American Logistics supports Navios Maritime Holdings with its growth, providing economies of scale.

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