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Ultrapetrol turns to profit in Q2

Ultrapetrol (Bahamas) Ltd posted second-quarter net income attributable to the company of $13.5 million, or $0.10 per share, compared to net loss of $5.4 million or $0.18 per share in the year-ago quarter. 

Source:
Date:
Updated:
Ultrapetrol
Wednesday, August 14, 2013
Wednesday, August 14, 2013

UltrapetrolNASSAU, Bahamas, Aug. 13, 2013 (GLOBE NEWSWIRE) — Ultrapetrol (Bahamas) Limited (Nasdaq:ULTR), an industrial transportation company serving marine transportation needs in three markets (River Business, Offshore Supply Business and Ocean Business), today announced financial results for the second quarter ended June 30, 2013.


Second Quarter 2013 and subsequent events highlights:

  • Recorded second quarter 2013 revenues of $121.8 million;
  • Recorded adjusted EBITDA of $32.6 million in the second quarter of 2013; 1 which includes adjusted EBITDA of $20.5 million from our River Business, adjusted EBITDA of $6.8 million from Offshore Supply Business segment, adjusted EBITDA of $0.2 million from Ocean Business segment, and adjusted EBITDA of $5.2 million from other activities—primarily foreign currency exchange cash gains;
  • Total adjusted net income and adjusted net income per share of $12.5 million and $0.09 per share, respectively, in the second quarter of 2013 which excludes the effect of a $1.1 million gain for deferred taxes on unrealized foreign exchange losses on U.S. dollar-denominated debt of our Brazilian subsidiary in our Offshore Supply Business, a $(0.2) million non-cash loss from debt extinguishments and a $0.1 million gain related to the sale of dry barges which were subsequently leased back to the Company (for accounting purposes such gain will be deferred over the term of the lease up to the present value of the lease payments).2 Before adjusting for these effects, the recorded total net income and net income per share are $13.5 million and $0.10, respectively;
  • We redeemed on July 10, 2013, all $180.0 million of our outstanding 9% First Preferred Ship Mortgage Notes due 2014 with proceeds of our offering of $200.0 million 8 7/8% First Preferred Ship Mortgage Notes due 2021 (at quarter end both the 2014 and the 2021 Notes are shown outstanding with $181.6 million of proceeds held in cash until redemption date of July 10, 2013);
  • Second quarter 2013 Adjusted EBITDA for our River Business segment increased almost threefold compared with the same period of 2012 as a result of normal crop year and rainfall and the increased activity from our Punta Alvear shipyard;
  • In July 2013, our PSV UP Amber, commenced operations in Brazil under a long term time charter with Petrobras. In addition, on August 12, 2013, we took delivery of UP Pearl, the eleventh PSV in our fleet which is expected to commence a four year charter with Petrobras during the fourth quarter of 2013;
  • Entered into a barge building contract for an additional seven tank barges for a third party. Delivery of these barges is expected in the fourth quarter of 2013.

1 For a reconciliation of non-GAAP measures, please see the tables included under the supplemental information section of this release.

2 For a detailed explanation of these adjustments and other adjustments elsewhere in this release, see “Overview of Financial Results” and the tables included under the Supplemental Information section of this release

Felipe Menéndez, Ultrapetrol’s President and Chief Executive Officer, stated, “We generated strong second quarter results, consistent with our expectations. During the quarter, we achieved strong utilization for our larger and more efficient river fleet, capitalizing on a crop year that has produced high volumes of soy beans and other agricultural commodities as well as the strong demand for iron ore transportation. Our shipyard is producing close to its maximum capacity and we continue to successfully sell barges to third parties as well while adding new barges to grow Ultrapetrol’s fleet. This has also been an exciting quarter in our Offshore Business: We renewed the contracts on four of our existing vessels with Petrobras for an additional four years with substantial increases over the expiring rates. We also chartered our two new vessels UP Amber, which was delivered in the first quarter of 2013, and UP Pearl, which was delivered yesterday at the yard in India, both to Petrobras for four years at a rate of $32,950 per day. Our ocean tankers have done well and continue to be employed in the same flag restricted trade in which they have operated in the past. In our container feeder service, we expect cargos to increase over second quarter levels in the third quarter.”

Mr. Menéndez continued, “The success we have experienced in River and Offshore so far this year is the result of the significant investment that the Company made in these sectors over the past five years which are now starting to show in our results. During the first half of the year we generated EBITDA of $51.9 million and expect to benefit from the full impact of stronger rates on our PSV fleet as the year progresses.”

Overview of Financial Results

Total revenues for the second quarter 2013 were $121.8 million as compared with $79.5 million in the same period of 2012.

Adjusted EBITDA for the second quarter 2013 was $32.6 million as compared with $9.6 million in the same period of 2012. For a reconciliation of adjusted EBITDA to cash flows from operating activities, please see the tables at the end of this release.

Adjusted net income for the second quarter of 2013 was $12.5 million which excludes the effect of a $1.1 million gain for deferred taxes on unrealized foreign exchange losses on U.S. dollar-denominated debt of our Brazilian subsidiary in our Offshore Supply Business, a $(0.2) million non-cash loss from debt extinguishments and a $0.1 million gain related to the sale of dry barges which were subsequently leased back to the Company (for accounting purposes such gain will be deferred over the term of the lease up to the present value of the lease payments). Before adjusting for these effects, the recorded total net income was $13.5 million.

Cecilia Yad, Ultrapetrol’s Chief Financial Officer, said, “We generated strong financial results during the second quarter and we continued strengthening our overall financial position. We successfully redeemed $180.0 million of our outstanding 9% Senior Notes due 2014 utilizing a portion of the proceeds of our $200.0 million offering of 8 7/8% First Preferred Ship Mortgage Notes due 2021. In placing the new 2021 Notes, we received continued support from existing investors and strong interest from the market in general, reflecting investors’ long term confidence in our investment strategy and prospects. With the successful refinancing, Ultrapetrol has addressed its most relevant short term maturity and has enhanced its ability to draw upon the Company’s improved flexibility and strong liquidity to advance our investing strategy and take advantage of future growth opportunities.”

Business Segment Highlights

River

The River Business experienced a 13% increase in the volume of cargo transported in the second quarter of 2013 as compared with the same period of 2012, which was due to normalized rainfall levels resulting in a significantly higher crop.

Second quarter 2013 River Business segment adjusted EBITDA was $20.5 million versus $5.4 million in the same period of 2012, a $15.1 million increase. For a reconciliation of segment adjusted EBITDA to operating profit (loss), please see the tables at the end of this release.

Results for the second quarter of 2013 demonstrate the positive compounded effects of rate increases and the normalized cargo volumes, taking into consideration the expected seasonality inherent in the segment as well as the sale of a larger number of barges manufactured in our shipyard to third parties. According to the latest USDA estimates, the soybean crop in Paraguay for 2013 is expected to be 9.4 million tons, 5.3 million tons or 132% above the 2012 crop. Argentina, Brazil, Bolivia, Paraguay and Uruguay are estimated to account for approximately 55% of world soybean production in 2013, as compared to 30% in 1995.

These figures are a sign of the strength of the long-term growth prospects of the agricultural sector along the Hidrovia, by which seeded area is expected to continue to grow, fostered by the strong prices of soybean and other agricultural commodities. This steady long-term growth trend represents an important demand driver for Ultrapetrol’s River Business. In addition, iron ore production in the three mines connected with the river system has also increased substantially in the last decade.

The Company will continue to install its new engines that will change power for a substantial portion of its line pushboats from diesel to heavy fuel consuming ones. The seventh re-engined pushboat is expected to commence operation within the first half of 2014. This program has demonstrated its potential to lead to substantial savings in fuel expense and to an increase in tow size and navigation speed, which we believe will enhance our EBITDA margins in the future.

During the second quarter of 2013, our Punta Alvear barge-building facility continued with the production of barges for third parties and has secured an order to build an additional set of barges for a non-related third party. Including this order, as well as the barges built for our own fleet, we expect to have our yard fully contracted until the end of the year.

Offshore Supply

In the Offshore Supply Business, we now operate a fleet of ten PSVs consisting of nine chartered to Petrobras in Brazil and one in the North Sea. On August 12, 2013, we took delivery from the yard of UP Pearl, the eleventh PSV in our fleet (third of the four ordered in India). The UP Pearl is expected to commence operations during the fourth quarter of 2013 under a four year charter with Petrobras after finalizing the vessel’s positioning trip and completing the set-up work for that charter. The adjusted EBITDA generated by the Offshore Supply Business segment during the second quarter of 2013 was $6.8 million, unchanged from the adjusted EBITDA generated in the same period of 2012. For a reconciliation of segment adjusted EBITDA to operating profit (loss), please see the tables at the end of this release.

Total revenues from the Offshore Supply Business for the second quarter of 2013 increased by $2.7 million compared with the same period of 2012. This represents a 15% increase which was primarily attributable to the operation of our UP Jade which commenced operation with Petrobras on August 10, 2012. During the second quarter of 2013 we renewed the charters of our UP Agua-MarinhaUP Topazio and UP Diamante with Petrobras for four years at $35,380 per day as compared to their expiring charters at $28,000 per day. Also, during the second quarter of 2013 the charter of UP Esmeralda was renewed for four years at $31,950 per day as compared to its expiring charter of $26,200 per day. Finally, on May 2, 2013, Petrobras confirmed the four year charters of our UP Amber, and UP Pearl at $32,950 starting between August 2013 and February 2014 in our option. We expect that the full effect of these new rates and progressively the earnings of the new vessels will positively impact our results in the third and fourth quarters of 2013.

As planned, Ultrapetrol continues its building program in India that will add the last and twelfth newbuilt vessel to the fleet. We expect to take delivery of the PSV, UP Onyx, during the first half of 2014.

The Company believes that the Brazilian market should grow in-line with Petrobras’ capital expenditure plans. Ultrapetrol’s fleet in the Offshore Supply Business has the advantage of being very modern and technologically capable of supporting deep sea oil drilling in both the Brazilian and North Sea markets.

Ocean

The Ocean Business segment generated adjusted EBITDA of $0.3 million in the second quarter of 2013 as compared to adjusted EBITDA of $0.6 million in the same period of 2012. For a reconciliation of segment adjusted EBITDA to operating profit (loss), please see the tables at the end of this release.

The 9% decrease in revenues from $19.6 million in the second quarter of 2012 to $17.8 million in the same period of 2013 is mainly attributable to a decrease in revenues from our container vessels as a result of a reduction in volumes transported. We expect volumes will return to normal in the third quarter which should reflect in higher returns.

The Company operated a total of four vessels in its Product Tanker fleet in the second quarter of 2013 (Miranda I, Amadeo, Alejandrina, and Austral) which continue to be employed in the South American coastal trade on charters with oil majors that operate in the region.

Operating costs in our Ocean Business, particularly manning costs, have been impacted by inflationary pressure on costs not adjusted by a proportional devaluation of the local currency with respect to the U.S. dollar.

Use of Non-GAAP Measures

Ultrapetrol believes that the disclosed non-Generally Accepted Accounting Principles, (“or GAAP”), measures such as adjusted EBITDA, adjusted net income and any other adjustments thereto, when presented in conjunction with comparable GAAP measures, are useful for investors to use in evaluating the liquidity of the company. These non-GAAP measures should not be considered a substitute for, or superior to, measures of liquidity prepared in accordance with GAAP. A reconciliation of adjusted EBITDA to segment operating profit and cash flow from operations is presented in the tables that accompany this press release.

Investment Community Conference Call

Ultrapetrol will host a conference call for investors and analysts on Wednesday, August 14, 2013, at 10:00 a.m. EDT accessible via telephone and Internet with an accompanying slide presentation. Investors and analysts may participate in the live conference call by dialing 888-469-1093 (toll-free U.S.) or +1-210-234-0032 (outside of the U.S.); passcode: ULTR. Please register at least 10 minutes before the conference call begins. A replay of the call will be available for one week via telephone starting approximately one hour after the call ends. The replay can be accessed at 866-490-2546 (toll-free U.S.) or +1-203-369-1701 (outside of the U.S.); passcode: 5034. The webcast will be archived on Ultrapetrol’s Web site for 30 days after the call.

About Ultrapetrol

Ultrapetrol is an industrial transportation company serving the marine transportation needs of its clients in the markets on which it focuses. It serves the shipping markets for containers, grain and soya bean products, forest products, minerals, crude oil, petroleum, and refined petroleum products, as well as the offshore oil platform supply market with its extensive and diverse fleet of vessels. These include river barges and pushboats, platform supply vessels, tankers and two container feeder vessels. More information on Ultrapetrol can be found atwww.ultrapetrol.net.

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