Grindrod Shipping Holdings Ltd., a global provider of maritime transportation services predominantly in the drybulk sector, announced its earnings results for the three months ended March 31, 2021, the three months ended June 30, 2021 and the six months ended June 30, 2021.

Financial Highlights for the First Quarter of 2021 Ended March 31, 2021(1)

Revenues of $71.8 million

Gross profit of $13.8 million
Profit for the period of $3.3 million
Profit for the period attributable to owners of the Company of $2.4 million, or $0.12 per ordinary share
Adjusted EBITDA of $21.8 million(2)
Handysize and supramax/ultramax TCE per day of $12,053 and $13,259, respectively(2)
(1) In view of commencing with earnings reporting on a quarterly basis, we have included the financial highlights for the First Quarter ended March 31, 2021 in this press release to provide additional detail on our First Half results.

Financial Highlights for the Second Quarter of 2021 Ended June 30, 2021

Revenues of $159.4 million
Gross profit of $34.3 million
Profit for the period of $24.2 million
Profit for the period attributable to owners of the Company of $19.8 million, or $1.02 per ordinary share
Adjusted EBITDA of $40.7 million(2)
Handysize and supramax/ultramax TCE per day of $18,104 and $21,916, respectively(2)
Financial Highlights for the First Half of 2021, Ended June 30, 2021

Revenues of $231.2 million

Gross profit of $48.2 million
Profit for the period of $27.6 million
Profit for the period attributable to owners of the Company of $22.1 million or $1.15 per ordinary share
Adjusted EBITDA of $62.5 million(2)
Handysize and supramax/ultramax TCE per day of $15,285 and $17,606, respectively(2)
Period end cash and cash equivalents of $58.1 million and restricted cash of $9.3 million
(2) Adjusted EBITDA and TCE per day are non-GAAP financial measures. For the definitions of these non-GAAP financial measures and the reconciliation of these measures to the most directly comparable financial measure calculated and presented in accordance with GAAP, please refer to the definitions and reconciliations in “Non-GAAP Financial Measures” at the end of this press release.

Operational Highlights for the First Quarter, Second Quarter and First Half of 2021

We sold the 2009-built small products tanker Breede for a gross price of $6.8 million with delivery to the buyers on April 14, 2021.
We sold the 2013-built medium range tankers Leopard Moon and Leopard Sun for a total gross price of $42.8 million with deliveries to the buyers on April 12, 2021 and April 20, 2021.
On May 07, 2021, the United Kingdom Upper Tribunal found in our favor with respect to a previously disclosed tax dispute with Her Majesty’s Revenue and Customs (“HMRC”). HMRC decided not to appeal the decision which prompted the release of $2.4 million in tax provisions that had been recorded in respect of such dispute in prior periods.
On May 19, 2021 the Company repaid the approximately $25.8 million remaining outstanding amount on the senior secured credit facility with an affiliate of Bain Capital Credit (“Bain”).
On June 28, 2021 the Company announced its transition to quarterly financial reporting from semi-annual reporting.
During the second quarter, we repurchased a combined total of 33,467 ordinary shares in the open market on NASDAQ and the JSE at an average price of $8.46 per share.
Implementation of New Dividend and Capital Return Policy

Commencing from the quarter ending September 30, 2021, the Company intends, subject to operating needs and other circumstances, to return approximately 30% of its adjusted net income (adjusted for extraordinary items) to shareholders through a combination of quarterly dividends and/or share repurchases. The Company intends to pay a minimum quarterly base dividend of $0.03 per share and an additional variable component, that will consist of additional dividends and/or share repurchases. We expect that the return to shareholders will be primarily in the form of dividends, though the Company retains the right to adjust the allocation to maximize value to shareholders based on market conditions, share price levels, share liquidity, and other related matters.

The timing and amount of dividend payments will be determined by our board of directors and could be affected by various factors, including our financial results and earnings, restrictions in our debt agreements, required capital expenditures, and the provisions of Singapore law affecting the payment of dividends to shareholders and other factors. Our board of directors may review and amend our dividend policy from time to time and we may stop paying dividends at any time and cannot assure you that we will pay any dividends, including any minimum quarterly base dividend amount, in the future or of the amount of any such dividends. For the avoidance of doubt, the payment of any dividends is not guaranteed, and the payment of dividend is subject at all times to the requirements and restrictions set out in the Company’s Constitution and Singapore Companies Act (Cap. 50).

Recent Developments

On July 21, 2021, the Group entered into an agreement to acquire the remaining shares in IVS Bulk held by Bain for a total purchase consideration of $46.3 million, comprising of $37.2 million for the ordinary equity shares and $9.1 million for the preference shares. The purchase price is based on appraised values as of May 13, 2021 and the IVS Bulk balance sheet as of April 30, 2021. The agreement with Bain is subject to customary closing conditions with closing to occur no later than September 30, 2021.
On August 17, 2021, Grindrod Shipping entered into an agreement to purchase the 2019 Japanese-built ultramax bulk carrier the IVS Phoenix, which we currently charter-in from its owners for a price of US$23.5 million, which we believe reflects a significantly reduced price relative to management’s estimate of the fair market value of the vessel due to the early termination of the prevailing charter agreement. The vessel was originally chartered-in for a minimum period of three years from delivery with two one-year extension options and no purchase options. In order to finance the acquisition, we have simultaneously entered into a financing arrangement with a separate Japanese owner on attractive terms for a gross amount of $25.0 million. As part of the financing arrangement, the Group will bareboat charter the vessel back for a period of up to 15 years and has the right, but not the obligation, to acquire the vessel after the first two years of the charter. The financing would be on similar terms to those completed for IVS Knot, IVS Kinglet and IVS Magpie during 2019 and Matuku in 2020. The transactions are expected to close by the end of September 2021 while the vessel will remain chartered-in on the original terms until closing.
As of August 16, 2021, we have contracted the following TCE per day for the third quarter of 2021 (1)(2):
Handysize: approximately 1,326 operating days at an average TCE per day of approximately $25,205
Supramax/ultramax: approximately 1,686 operating days at an average TCE per day of approximately $30,666

CEO Commentary

Martyn Wade, the Chief Executive Officer of Grindrod Shipping, commented:

“Grindrod Shipping took full advantage of the improving market conditions in the drybulk sector during the first and the second quarters of 2021 to deliver strong results. In addition, we were able to reduce our debt by approximately $66.9 million while concurrently increasing our total cash and cash equivalents by approximately $20.1 million through strong free cash flow from our drybulk business and the timely sales of nearly all of our remaining product tankers. Our healthy balance sheet and strong industry fundamentals now position us well as we seek to both reward our shareholders and demonstrate the benefits of the differentiated commercial strategy of Grindrod Shipping.

To that end, we are pleased to announce the initiation of a quarterly dividend and capital return policy which coincides with our transition to quarterly financial reporting. Commencing with the third quarter, the Company intends to return approximately 30% of its adjusted net income to shareholders through a combination of quarterly dividends and/or share repurchases. The Company intends, subject to operating needs and other circumstances, to pay a minimum quarterly base dividend of $0.03 per share and an additional variable component, that will consist of additional dividends and/or share repurchases. This variable policy aims to create a sustainable dividend throughout the market cycles while enabling our shareholders to share in the market strength.

On the commercial side, the dynamic approach of the Company that includes opportunistically chartering in vessels on both long- and short-term time charters in order to service our cargo contracts is bearing significant fruit. Our long-term charter-in vessels are contracted at what we believe to be well below current charter market rates and most contain favorable extension options and/or fixed price purchase options that are now notably below the current market value. This allows us the option to pursue growth at prices considerably below prevailing levels in the secondhand and charter markets. In addition, we have been able to complement our core fleet with a number of short-term charter-in vessels on which we hold a series of charter extension options at commercially favorable levels. Together with our owned fleet of predominantly Japanese-built vessels, all of these options demonstrate the flexibility of our operating model.

Finally, as we work to close the recently announced agreement to acquire the remainder of our IVS Bulk subsidiary, expected to occur in the coming month, we look forward to achieving the final key step in our corporate transformation since listing. Upon closing, we will have completed the acquisition or sale of all JV vessels originally held and sold all our spot trading product tankers, all while positioning the Company to take full advantage of the current strong drybulk market.”

Results for the Three Months Ended June 30, 2021 and 2020

In comparison to the results for the second quarter of 2020, the results for the second quarter of 2021 were significantly impacted by higher TCE per day rates achieved in our handysize and supramax/ultramax drybulk carrier segments, reflecting the stronger spot markets in these segments. Our tanker segment results have been affected by the sale of vessels only days into the reporting period as part of our strategy to divest from the tanker business to focus on the drybulk segments. Vessel operating costs per day were higher in the handysize and supramax/ultramax drybulk carrier segments for the second quarter of 2021 in comparison to the second quarter of 2020 due to increased crew repatriation costs partly as a result of COVID-19 travel restrictions, quarantine requirements and related costs. Cost of sales increased due to higher charter hire costs incurred for our short-term chartered-in vessels as drybulk spot charter rates increased in the second quarter of 2021. In addition, cost of ship sales increased as two medium range tankers and a small tanker were sold in the second quarter of 2021 compared to the sale of two medium range tankers with lower cost prices in the second quarter of 2020. Administrative expenses increased in the second quarter of 2021 as compared to the second quarter of 2020 due to increased staff costs. Other operating income (expense) improved in the second quarter of 2021 as compared to the second quarter of 2020 due to reversal of ship impairments and reversal of right-of-use asset impairments partially offset by impairments to net disposal group and goodwill in the second quarter of 2021 compared to ship impairments recorded in the second quarter of 2020. The income tax benefit increased in the second quarter of 2021 as compared to the second quarter of 2020 due to the reversal of a provision for a tax-related legal case which was decided in our favor.

Revenue was $159.4 million for the three months ended June 30, 2021 and $84.7 million for the three months ended June 30, 2020. Vessel revenue was $109.6 million for the three months ended June 30, 2021 and $55.6 million for the three months ended June 30, 2020.

In the drybulk business, handysize total revenue and supramax/ultramax total revenue was $37.4 million and $71.0 million, respectively, for the three months ended June 30, 2021, and $21.6 million and $21.9 million, respectively, for the three months ended June 30, 2020. Handysize vessel revenue and supramax/ultramax vessel revenue was $37.2 million and $71.0 million, respectively, for the three months ended June 30, 2021, and $21.5 million and $21.9 million, respectively, for the three months ended June 30, 2020.

In the tankers business, our medium range tankers and small tankers total revenues were $42.5 million and $6.9 million, respectively, for the three months ended June 30, 2021, and $38.8 million and $1.0 million, respectively, for the three months ended June 30, 2020. Medium range tankers and small tankers vessel revenues were $0 million and $0 million, respectively, for the three months ended June 30, 2021 and $10.0 million and $1.0 million, respectively for the three months ended June 30, 2020. Total revenue was affected by the sale of tankers as we divested from the tanker business.

Handysize TCE per day was $18,104 per day for the three months ended June 30, 2021 and $5,852 per day for the three months ended June 30, 2020. Supramax/ultramax TCE per day was to $21,916 per day for the three months ended June 30, 2021 and $7,676 per day for the three months ended June 30, 2020.

The remaining small tankers and two medium range tankers were sold early in the period and therefore generated no revenue during the period. The TCE calculations for the second quarter 2021 are therefore not directly comparable to the second quarter 2020.

Cost of sales was $125.1 million for the three months ended June 30, 2021 and $82.8 million for the three months ended June 30, 2020.

In the drybulk business, our handysize segment and supramax/ultramax segment cost of sales was $23.1 million and $51.2 million, respectively, for the three months ended June 30, 2021 and $23.6 million and $24.3 million, respectively, for the three months ended June 30, 2020.

Handysize voyage expenses and supramax/ultramax voyage expenses were $7.7 million and $17.5 million, respectively, for the three months ended June 30, 2021 and $10.4 million and $9.3 million, respectively, for the three months ended June 30, 2020. Handysize vessel operating costs and supramax/ultramax vessel operating costs were $8.4 million and $3.7 million, respectively, for the three months ended June 30, 2021, and $7.1 million and $3.4 million, respectively, for the three months ended June 30, 2020. Handysize vessel operating costs per day were $6,130 per day for the three months ended June 30, 2021 and $4,735 per day for the three months ended June 30, 2020. Supramax/ultramax vessel operating costs per day were $5,116 per day for the three months ended June 30, 2021 and $4,688 per day for the three months ended June 30, 2020.

The long-term charter-in costs per day for our supramax/ultramax fleet was $12,867 per day during the three months ended June 30, 2021. During this period, out of 2,442 operating days in the supramax/ultramax segment, 57.5% were fulfilled with owned/long-term chartered-in vessels and the remaining 42.5% with short-term chartered-in vessels.

In the tankers business, medium range tankers and small tankers cost of sales were $43.7 million and $7.3 million, respectively, for the three months ended June 30, 2021 and $34.3 million and $1.0 million, respectively, for the three months ended June 30, 2020.

Medium range tankers voyage expenses and small tankers voyage expenses were $0 million and $0 million, respectively, for the three months ended June 30, 2021 and $0 million and $0.3 million, respectively, for the three months ended June 30, 2020. Medium range tankers vessel operating costs and small tankers vessel operating costs were $0.2 million and $0 million, respectively, for the three months ended June 30, 2021 and $2.1 million and $0.6 million, respectively, for the three months ended June 30, 2020. Medium range tankers vessel operating costs per day were $7,394 per day for the three months ended June 30, 2021 and $6,402 per day for the three months ended June 30, 2020. Small tankers vessel operating costs per day were $1,400 per day for the three months ended June 30, 2021 and $6,056 per day for the three months ended June 30, 2020.

Gross profit was $34.3 million for the three months ended June 30, 2021 and $1.8 million for the three months ended June 30, 2020.

Other operating income (expense) was operating income of $0.2 million for the three months ended June 30, 2021 and operating expense of $4.1 million for the three months ended June 30, 2020.

Administrative expenses were $8.8 million for the three months ended June 30, 2021 and $5.8 million for the three months ended June 30, 2020.

Share of losses of joint ventures was $0 million for the three months ended June 30, 2021 and a loss of $1.3 million for the three months ended June 30, 2020.

Interest income was $0 million for the three months ended June 30, 2021 and $0.1 million for the three months ended June 30, 2020.

Interest expense was $4.2 million for the three months ended June 30, 2021 and $4.4 million for the three months ended June 30, 2020.

Income tax benefit was $2.6 million for the three months ended June 30, 2021 and was $0.2 million for the three months ended June 30, 2020.

Profit for the three months ended June 30, 2021 was $24.2 million compared to a loss of $13.3 million for the three months ended June 30, 2020. Profit attributable to owners of the Company for the three months ended June 30, 2021 was $19.8 million compared to a loss of $11.8 million for the three months ended June 30, 2020.

Results for the Six Months Ended June 30, 2021 and 2020

In comparison to the results for the first half of 2020, the results for the first half of 2021 were impacted by higher TCE per day rates achieved in our handysize and supramax/ultramax drybulk carrier segments, reflecting the stronger spot markets in these segments, and lower TCE per day rates achieved in our medium range tanker and small tanker segments, reflecting the weaker spot market in this segment. Cost of sales increased due to the higher short-term charter hire costs as drybulk spot charter rates increased in the first half of 2021 as well as increased cost of ship sales as two medium range tankers and a small tanker were sold in the first half of 2021 compared to the sale of two medium range tankers and one small tanker with lower cost prices in the first half of 2020. These increases were partially offset by the decrease in drybulk voyage expenses primarily due to a reduced number of drybulk freight voyages in favor of charter contracts that resulted in a decrease to fuel and ports costs. Vessel operating costs per day were higher in the handysize and supramax/ultramax drybulk carrier segments for the first half of 2021 in comparison to the first half of 2020 due to increased crew repatriation costs partly as a result of COVID-19 travel restrictions, quarantine requirements and related costs. Administrative expenses increased in the first half of 2021 as compared to the first half of 2020 due to increased staff costs. Other operating income improved in the first half of 2021 as compared to the first half of 2020 due to the reversals of impairments on ships and the reversal of impairments on right-of-use assets which were partly offset by higher impairments on goodwill and intangibles and the disposal group. The income tax benefit increased in the first half of 2021 as compared to the first half of 2020 due to the reversal of a provision for a tax-related legal case which was decided in our favor.

Revenue was $231.2 million for the six months ended June 30, 2021 and $167.1 million for the six months ended June 30, 2020. Vessel revenue was $181.0 million for the six months ended June 30, 2021 and $128.0 million for the six months ended June 30, 2020.

In the drybulk business, handysize total revenue and supramax/ultramax total revenue was $61.1 million and $114.5 million, respectively, for the six months ended June 30, 2021, and $38.6 million and $63.8 million, respectively, for the six months ended June 30, 2020. Handysize vessel revenue and supramax/ultramax vessel revenue was $60.8 million and $114.4 million, respectively, for the six months ended June 30, 2021, and $38.3 million and $63.6 million, respectively, for the six months ended June 30, 2020.

In the tankers business, our medium range tankers and small tankers total revenues were $44.4 million and $8.2 million, respectively, for the six months ended June 30, 2021, and $49.2 million and $12.6 million, respectively, for the six months ended June 30, 2020. Medium range tankers and small tankers vessel revenues were $1.8 million and $1.3 million, respectively, for the six months ended June 30, 2021 and $20.4 million and $3.5 million, respectively for the six months ended June 30, 2020.

Handysize TCE per day was $15,285 per day for the six months ended June 30, 2021 and $5,773 per day for the six months ended June 30, 2020. Supramax/ultramax TCE per day was to $17,606 per day for the six months ended June 30, 2021 and $9,163 per day for the six months ended June 30, 2020.

Medium range tankers TCE per day was $8,268 per day for the six months ended June 30, 2021 and $19,343 per day for the six months ended June 30, 2020. Small tankers TCE per day was $8,648 per day for the six months ended June 30, 2021 and $11,368 per day for the six months ended June 30, 2020.

Cost of sales was $183.1 million for the six months ended June 30, 2021 and $158.2 million for the six months ended June 30, 2020.

In the drybulk business, our handysize segment and supramax/ultramax segment cost of sales was $41.6 million and $88.9 million, respectively, for the six months ended June 30, 2021 and $43.1 million and $63.3 million, respectively, for the six months ended June 30, 2020.

Handysize voyage expenses and supramax/ultramax voyage expenses were $14.1 million and $28.8 million, respectively, for the six months ended June 30, 2021 and $18.7 million and $31.0 million, respectively, for the six months ended June 30, 2020. Handysize vessel operating costs and supramax/ultramax vessel operating costs were $15.2 million and $7.5 million, respectively, for the six months ended June 30, 2021, and $13.3 million and $5.7 million, respectively, for the six months ended June 30, 2020. Handysize vessel operating costs per day were $5,602 per day for the six months ended June 30, 2021 and $4,808 per day for the six months ended June 30, 2020. Supramax/ultramax vessel operating costs per day were $5,212 per day for the six months ended June 30, 2021 and $4,666 per day for the six months ended June 30, 2020.

The long-term charter-in costs per day for our supramax/ultramax fleet was $12,611 per day during the first six months of 2021. During this period, out of 4,864 operating days in the supramax/ultramax segment, 57.5% were fulfilled with owned/long-term chartered-in vessels and the remaining 42.5% with short-term chartered-in vessels.

In the tankers business, medium range tankers and small tankers cost of sales were $44.8 million and $8.3 million, respectively, for the six months ended June 30, 2021 and $41.0 million and $12.0 million, respectively, for the six months ended June 30, 2020.

Medium range tankers voyage expenses and small tankers voyage expenses were $0 million and $0.4 million, respectively, for the six months ended June 30, 2021 and $0 million and $0.9 million, respectively, for the six months ended June 30, 2020. Medium range tankers vessel operating costs and small tankers vessel operating costs were $1.4 million and $0.6 million, respectively, for the six months ended June 30, 2021 and $4.6 million and $1.5 million, respectively, for the six months ended June 30, 2020. Medium range tankers vessel operating costs per day were $6,634 per day for the six months ended June 30, 2021 and $6,664 per day for the six months ended June 30, 2020. Small tankers vessel operating costs per day were $5,895 per day for the six months ended June 30, 2021 and $6,377 per day for the six months ended June 30, 2020.

Gross profit was $48.2 million for the six months ended June 30, 2021 and $8.9 million for the six months ended June 30, 2020.

Other operating income was $0.4 million for the six months ended June 30, 2021 and $2.2 million for the six months ended June 30, 2020.

Administrative expenses were $15.7 million for the six months ended June 30, 2021 and $12.2 million for the six months ended June 30, 2020.

Share of losses of joint ventures was $0 million for the six months ended June 30, 2021 and a loss of $2.5 million for the six months ended June 30, 2020.

Interest income was $0.1 million for the six months ended June 30, 2021 and $0.4 million for the six months ended June 30, 2020.

Interest expense was $7.7 million for the six months ended June 30, 2021 and $8.6 million for the six months ended June 30, 2020.

Income tax benefit (expense) was a benefit of $2.4 million for the six months ended June 30, 2021 and an expense of $0.5 million for the six months ended June 30, 2020.

Profit for the six months ended June 30, 2021 was $27.6 million and a loss of $12.3 million for the six months ended June 30, 2020. Profit attributable to owners of the Company for the six months ended June 30, 2021 was $22.1 million and a loss of $10.5 million for the six months ended June 30, 2020.

Net cash flows generated from operating activities was an inflow of $102.1 million for the six months ended June 30, 2021 and an inflow of $48.8 million for the six months ended June 30, 2020. Net cash generated from (used in) investing activities was an inflow of $0.2 million for the six months ended June 30, 2021 and an outflow of $25.6 million for the six months ended June 30, 2020. Net cash flows used in financing activities was an outflow of $82.3 million for the six months ended June 30, 2021 and an outflow of $15.2 million for the six months ended June 30, 2020.

As of June 30, 2021, we had cash and equivalents of $58.1 million and restricted cash of $9.3 million.
Source: Grindrod Shipping Holdings Ltd.