Grindrod Shipping Holdings Ltd. (NASDAQ: GRIN) (JSE: GSH) (“Grindrod Shipping” or “Company” or “we” or “us” or “our”), a global provider of maritime transportation services predominantly in the drybulk sector, today announced its earnings results for the three months and the six months ended June 30, 2022.
Financial Highlights for the Three Months Ended June 30, 2022
▪Revenues of $161.6 million
▪Gross profit of $64.6 million
▪Profit for the period and attributable to owners of the Company of $56.8 million, or $2.99 per ordinary share
▪Adjusted net income of $53.3 million, or $2.81 per ordinary share
▪Adjusted EBITDA for the period of $73.9 million
▪Handysize and supramax/ultramax TCE per day of $27,479 and $31,021, respectively
Financial Highlights for the Six Months Ended June 30, 2022
▪Revenues of $271.9 million
▪Gross profit of $105.3 million
▪Profit for the period and attributable to owners of the Company of $85.8 million, or $4.56 per ordinary share
▪Adjusted net income of $83.1 million, or $4.42 per ordinary share
▪Adjusted EBITDA of $124.1 million
▪Handysize and supramax/ultramax TCE per day of $24,990 and $27,604, respectively
▪Period end cash and cash equivalents of $160.0 million and restricted cash of $9.7 million
Operational Highlights for the Three Months Ended June 30, 2022
▪On June 1, 2022, we sold the 2016-built medium range product tanker, Matuku for a gross price of $30.0 million.
▪On May 10, 2022, we exercised the purchase option on the chartered-in 2015-built supramax bulk carrier, IVS
Pinehurst, for an amount of $18.0 million with delivery to us on July 25, 2022. The vessel remained chartered-in at her original contract rate until delivered to us.
▪On May 12, 2022, we agreed to extend the long-term charter on the 2014-built supramax bulk carrier, IVS Crimson Creek, for a period of 11 to 13 months at a charter-in rate of $26,276 per day commencing May 1, 2022.
Recent Developments
▪On August 17, 2022, the Company’s Board of Directors declared an interim quarterly cash dividend of $0.84 per ordinary share, payable on or about September 19, 2022, to all shareholders of record as of September 9, 2022 (the “Record Date”). As of August 17, 2022, there were 18,996,493 common shares of the Company outstanding (excluding treasury shares).
In view of the Record Date of September 9, 2022, shareholders may not reposition shares between the JSE and the U.S. Register during the period from September 7, 2022, at 9.00 a.m. (South African time) until September 12, 2022 at 9.00 a.m. (South African time).
▪As of August 10, 2022, we have contracted the following TCE per day for the third quarter of 2022 (1):
-Handysize: approximately 1,020 operating days(2) at an average TCE per day of approximately $25,127
-Supramax/ultramax: approximately 1,524 operating days(2) at an average TCE per day of approximately $26,766
CEO Commentary
Stephen Griffiths, the Interim Chief Executive Officer and Chief Financial Officer of Grindrod Shipping, commented:
“Grindrod Shipping reported another record quarterly performance with a strong second quarter of 2022 reflecting the resilient markets in our handysize and supramax/ultramax drybulk carrier segments. For the second quarter of 2022, we achieved $73.9 million of Adjusted EBITDA and
$53.3 million of Adjusted net income, or $2.81 per ordinary share from continuing operations. These robust results have allowed us to announce our highest quarterly dividend to date of $0.84 per ordinary share, continuing our flexible capital return policy of rewarding our shareholders with material dividends in times of market strength. Since our first dividend with respect to the third quarter of 2021, we have declared a combined total dividend of $2.75 per ordinary share over the last four quarters.
The dry bulk market remained healthy in the second quarter 2022, despite the ongoing Russian-Ukraine conflict and disruptions in traditional trade routes. The smaller segments in which we operate are still earning a premium over the larger vessels due to their versatility, benefiting from a broader base of cargoes and continued spillover from the container trade. The supply picture remains at very healthy levels with continued minimal ordering of new vessels due to concerns over environmental regulations and higher newbuilding prices. As we head into the second half of the year, more macroeconomic concerns have emerged as the global economy grapples with elevated inflation levels and rising interest rates. Thus far the impact on the dry cargo market has been minimal, though we remain prudent in our approach to risk management given the potential uncertainty.”
Unaudited Results for the Three Months Ended June 30, 2022 and 2021
Continuing Operations
Revenue was $161.6 million for the three months ended June 30, 2022 and $109.8 million for the three months ended June 30, 2021. Vessel revenue was $131.5 million for the three months ended June 30, 2022 and $109.7 million for the three months ended June 30, 2021. Revenue increased due to improved market conditions in the drybulk business which was slightly offset by a reduction in short-term operating days and the sale of a medium range tanker in the second quarter of 2022 (included in the Other segment under a bareboat charter) compared to no ship sales in continuing operations for the same period in 2021.
Our handysize total revenue and supramax/ultramax total revenue was $52.6 million and $78.2 million, respectively, for the three months ended June 30, 2022, and $37.4 million and $71.0 million, respectively, for the three months ended June 30, 2021. Handysize vessel revenue and supramax/ultramax vessel revenue was $52.4 million and $78.2 million, respectively, for the three months ended June 30, 2022, and
$37.2 million and $71.0 million, respectively, for the three months ended June 30, 2021. The results for the three months ended June 30, 2022 were positively 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 which was slightly offset by a reduction in short-term operating days.
Handysize TCE per day was $27,479 per day for the three months ended June 30, 2022 and $18,104 per day for the three months ended June 30, 2021. Supramax/ultramax TCE per day was $31,021 per day for the three months ended June 30, 2022 and $21,916 per day for the three months ended June 30, 2021.
Cost of sales was $97.0 million for the three months ended June 30, 2022 and $74.2 million for the three months ended June 30, 2021. The increase was primarily due to the cost of a ship sold in the second quarter of 2022 compared to no ship sales in continuing operations for the same period in 2021, increased costs for short-term charters which was offset by a decrease in short-term operating days, a decrease in voyage expenses and a decrease in vessel operating expenses.
Our handysize segment and supramax/ultramax segment cost of sales was $24.8 million and $42.6 million, respectively, for the three months ended June 30, 2022 and $23.1 million and $51.2 million, respectively, for the three months ended June 30, 2021.
Handysize voyage expenses and supramax/ultramax voyage expenses were $9.6 million and $13.1 million, respectively, for the three months ended June 30, 2022 and $7.7 million and $17.5 million, respectively, for the three months ended June 30, 2021. Handysize charter hire and supramax/ultramax charter hire were $4.7 million and $13.9 million, respectively, for the three months ended June 30, 2022 and $3.9 million and $16.5 million, respectively, for the three months ended June 30, 2021.
Handysize vessel operating costs and supramax/ultramax vessel operating costs were $7.2 million and $4.2 million, respectively, for the three months ended June 30, 2022, and $8.4 million and $3.7 million, respectively, for the three months ended June 30, 2021. Handysize vessel operating costs per day were $5,247 per day for the three months ended June 30, 2022 and $6,130 per day for the three months ended June 30, 2021. Vessel operating costs per day were lower in the handysize drybulk carrier segment for the three months ended June 30, 2022 in comparison to the three months ended June 30, 2021 due to a decrease in the purchase of spare parts and the cost to airfreight the spares to the vessels, management fees on two vessels that were previously managed by an external company and crew signing off costs that were timed differently in the previous period, slightly offset by an increase in insurance costs. Supramax/ultramax vessel operating costs per day were $5,139 per day for the three months ended June 30, 2022 and $5,116 per day for the three months ended June 30, 2021.
Vessel operating costs per day increased for the three months ended June 30, 2022 in comparison to the three months ended June 30, 2021 due to increased repair costs on a small number of vessels and increased insurance costs, partially offset by the decrease in the purchase of spares and the cost to airfreight the spares to the vessels and a decrease in crew signing off costs that were timed differently in the previous period.
The long-term charter-in costs per day for our supramax/ultramax fleet was $13,948 per day during the three months ended June 30, 2022 and
$12,867 per day for the three months ended June 30, 2021. The increase is due to the extension of a charter agreement at a higher rate in May 2022. During the three months ended June 30, 2022, out of 2,100 operating days in the supramax/ultramax segment, 68.3% were fulfilled with owned/long-term chartered-in vessels and the remaining 31.7% with short-term chartered-in vessels compared to 2,422 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 the three months ended June 30, 2021.
Gross profit was $64.6 million for the three months ended June 30, 2022 and $35.6 million for the three months ended June 30, 2021.
Other operating income was $4.1 million for the three months ended June 30, 2022 and $3.3 million for the three months ended June 30, 2021.
Administrative expense was $7.6 million for the three months ended June 30, 2022 and $7.9 million for the three months ended June 30, 2021. Interest income was $0.2 million for the three months ended June 30, 2022 and $0.0 million for the three months ended June 30, 2021.
Interest expense was $4.3 million for the three months ended June 30, 2022 and $3.9 million for the three months ended June 30, 2021.
Income tax (expense) benefit was an expense of $0.2 million for the three months ended June 30, 2022 and was a benefit of $0.1 million for the three months ended June 30, 2021.
Profit for the three months ended June 30, 2022 was $56.8 million compared to $27.3 million for the three months ended June 30, 2021.
Profit attributable to owners of the Company for the three months ended June 30, 2022 was $56.8 million compared to $22.8 million for the three months ended June 30, 2021.
Continuing and Discontinued Operation
Profit for the three months ended June 30, 2022 was $56.8 million compared to $24.2 million for the three months ended June 30, 2021.
Profit attributable to owners of the Company for the three months ended June 30, 2022 was $56.8 million compared to $19.8 million for the three months ended June 30, 2021.
Unaudited Results for the six months ended June 30, 2022 and 2021
Continuing Operations
Revenue was $271.9 million for the six months ended June 30, 2022 and $178.3 million for the six months ended June 30, 2021. Vessel revenue was $241.7 million for the six months ended June 30, 2022 and $177.9 million for the six months ended June 30, 2021. Revenue increased due to improved market conditions in the drybulk business which was slightly offset by a reduction in short-term operating days and the sale of a medium range tanker in the first half of 2022 (included in the Other segment under a bareboat charter) compared to no ship sales in continuing operations for the same period in 2021.
Our handysize total revenue and supramax/ultramax total revenue was $88.8 million and $151.0 million, respectively, for the six months ended June 30, 2022, and $61.1 million and $114.5 million, respectively, for the six months ended June 30, 2021. Handysize vessel revenue and supramax/ultramax vessel revenue was $88.6 million and $151.0 million, respectively, for the six months ended June 30, 2022, and $60.8 million and $114.4 million, respectively, for the six months ended June 30, 2021. The results for the six months ended June 30, 2022 were positively 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 which was slightly offset by a reduction in short-term operating days.
Handysize TCE per day was $24,990 per day for the six months ended June 30, 2022 and $15,285 per day for the six months ended June 30, 2021. Supramax/ultramax TCE per day was $27,604 per day for the six months ended June 30, 2022 and $17,606 per day for the six months ended June 30, 2021.
Cost of sales was $166.6 million for the six months ended June 30, 2022 and $130.1 million for the six months ended June 30, 2021. The increase was primarily due to the cost of a ship sold in the first half of 2022 compared to no ship sales in continuing operations for the same period in 2021 and increased costs for short-term charters which was slightly offset by a decrease in short-term operating days.
In the drybulk business, our handysize segment and supramax/ultramax segment cost of sales was $45.2 million and $92.1 million, respectively, for the six months ended June 30, 2022 and $41.6 million and $88.9 million, respectively, for the six months ended June 30, 2021.
Handysize voyage expenses and supramax/ultramax voyage expenses were $14.9 million and $31.5 million, respectively, for the six months ended June 30, 2022 and $14.1 million and $28.8 million, respectively, for the six months ended June 30, 2021. Handysize vessel operating costs and supramax/ultramax vessel operating costs were $14.8 million and $8.7 million, respectively, for the six months ended June 30, 2022, and $15.2 million and $7.5 million, respectively, for the six months ended June 30, 2021. Handysize vessel operating costs per day were $5,461 per day for the six months ended June 30, 2022 and $5,602 per day for the six months ended June 30, 2021.
Vessel operating costs per day were lower in the handysize drybulk carrier segment for the six months ended June 30, 2022 in comparison to the six months ended June 30, 2021 due to a decrease in the purchase of spare parts and the cost to airfreight the spares to the vessels and a decrease in management fees on two vessels that were previously managed by an external company, slightly offset by an increase in insurance costs. Supramax/ultramax vessel operating costs per day were $5,338 per day for the six months ended June 30, 2022 and $5,212 per day for the six months ended June 30, 2021. Vessel operating costs per day were higher in the supramax/ultramax carrier segment for the six months ended June 30, 2022 in comparison to the six months ended June 30, 2021 due to repair costs on a small number of vessels and increased insurance costs, slightly offset by the decrease in the purchase of spares and the cost to airfreight the spares to the vessels.
The long-term charter-in costs per day for our supramax/ultramax fleet was $13,552 per day during the six months ended June 30, 2022 and
$12,611 per day for the six months ended June 30, 2021. The increase is due to the extension of a charter agreement in May 2022 at a higher rate. During the six months ended June 30, 2022, out of 4,328 operating days in the supramax/ultramax segment, 66.1% were fulfilled with owned/long-term chartered-in vessels and the remaining 33.9% with short-term chartered-in vessels compared to 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 the six months ended June 30, 2021.
Gross profit was $105.3 million for the six months ended June 30, 2022 and $48.2 million for the six months ended June 30, 2021.
Other operating income was $3.8 million for the six months ended June 30, 2022 and $3.4 million for the six months ended June 30, 2021.
Administrative expense was $15.9 million for the six months ended June 30, 2022 and $14.2 million for the six months ended June 30, 2021. Administrative expense increased in the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 due to higher staff incentive costs.
Interest income was $0.3 million for the six months ended June 30, 2022 and $0.1 million for the six months ended June 30, 2021. Interest expense was $7.4 million for the six months ended June 30, 2022 and $7.1 million for the six months ended June 30, 2021.
Income tax (expense) benefit was an expense of $0.3 million for the six months ended June 30, 2022 and a benefit of $0.1 million for the six months ended June 30, 2021.
Profit for the six months ended June 30, 2022 was $85.8 million and $30.4 million for the six months ended June 30, 2021.
Profit attributable to owners of the Company for the six months ended June 30, 2022 was $85.8 million and $25.0 million for the six months ended June 30, 2021.
Continuing and Discontinued Operation
Profit for the six months ended June 30, 2022 was $85.8 million compared to a profit of $27.6 million for the six months ended June 30, 2021.
Profit attributable to owners of the Company for six months ended June 30, 2022 was $85.8 million compared to $22.1 million for the six months ended June 30, 2021.
Net cash flows generated from operating activities was $137.8 million for the six months ended June 30, 2022 and $102.1 million for the six months ended June 30, 2021. Net cash (used in) generated from investing activities was an outflow of $0.1 million for the six months ended June 30, 2022 and an inflow of $0.2 million for the six months ended June 30, 2021. Net cash flows used in financing activities was $81.6 million for the six months ended June 30, 2022 and $82.3 million for the six months ended June 30, 2021.
As of June 30, 2022, we had cash and equivalents of $160.0 million and restricted cash of $9.7 million.
Fleet Table
The following table sets forth certain summary information regarding our fleet as of the date of this press release.
Drybulk Carriers — Owned Fleet (25 Vessels)
Selected Historical and Statistical Data of Our Operating Fleet
Set forth below are selected historical and statistical data of our operating fleet for the three months ended June 30, 2022 and 2021 and the six months ended June 30, 2022 and 2021 that we believe may be useful in better understanding our operating fleet’s financial position and results of operations. This table contains certain information regarding TCE per day, vessel operating costs per day and long-term charter-in costs per day which are non-GAAP measures. For a discussion of certain of these measures, see “Non-GAAP Financial Measures” at the end of this press release.
During the six months ended June 30, 2021, cash flows relating to the discontinued operation of the tanker business were cash used in operating activities of $254,000, cash used in investing activities of $2,000 and cash used in financing activities $855,000. There is no discontinued operation during the six months ended June 30, 2022.
Non-GAAP Financial Measures
The financial information included in this press release includes certain “non-GAAP financial measures” as such term is defined in SEC regulations governing the use of non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s operating performance, financial position or cash flows that excludes or includes amounts that are included in, or excluded from, the most directly comparable measure calculated and presented in accordance with IFRS. For example, non-GAAP financial measures may exclude the impact of certain unique and/or non-operating items such as acquisitions, divestitures, restructuring charges, large write-offs or items outside of management’s control. Management believes that the non-GAAP financial measures described below provide investors and analysts useful insight into our financial position and operating performance.
TCE Revenue and TCE per day
TCE revenue is defined as vessel revenue less voyage expenses. Such TCE revenue, divided by the number of our operating days during the period, is TCE per day. Vessel revenue and voyage expenses as reported for our operating segments include a proportionate share of vessel revenue and voyage expenses attributable to our joint ventures based on our proportionate ownership of the joint ventures for the period the joint venture existed during the relevant period. The number of operating days used to calculate TCE per day also includes the proportionate share of our joint ventures’ operating days for the period the joint venture existed during the relevant period and also includes charter-in days.
TCE per day is a common shipping industry performance measure used primarily to compare daily earnings generated by vessels on time charters with daily earnings generated by vessels on voyage charters, because charter hire rates for vessels on voyage charters have to cover voyage expenses and are generally not expressed in per-day amounts while charter hire rates for vessels on time charters do not cover voyage expenses and generally are expressed in per day amounts.
Vessel operating costs per day
Vessel operating costs per day represents vessel operating costs divided by the number of calendar days for owned vessels during the period. The vessel operating costs and the number of calendar days used to calculate vessel operating costs per day includes the proportionate share of our joint ventures’ vessel operating costs and calendar days for the period the joint venture existed during the relevant period and excludes charter-in costs and charter-in days.
Vessel operating costs per day is a non-GAAP performance measure commonly used in the shipping industry to provide an understanding of the daily technical management costs relating to the running of owned vessels.
Long-term charter-in costs and Long-term charter-in costs per day
Long-term charter-in costs is defined as the charter costs relating to chartered-in vessels included in our fleet from time to time, which are vessels for which the period of the charter that we initially commit to is 12 months or more, even if at a given time the remaining period of their charter may be less than 12 months (“long-term charter-in vessels”). Such long-term charter-in costs, divided by the number of operating days for the relevant vessels during the period, is long-term charter-in costs per day.
Long-term charter-in costs and long-term charter-in costs per day are non-GAAP performance measures used primarily to provide an understanding of the total costs and total costs per day relating to the charter-in of the Company’s long-term chartered-in vessels.
Below is a reconciliation from Long-term charter-in costs to Charter hire costs for the three month periods ended June 30, 2022 and 2021.
EBITDA and Adj usted EBITDA
EBITDA is defined as earnings before income tax benefit (expense), interest income, interest expense, share of profits (losses) of joint ventures and depreciation and amortization. Adjusted EBITDA is EBITDA adjusted to exclude the items set forth in the table below, which represent certain non-recurring, non-operating or other items that we believe are not indicative of the ongoing performance of our core operations.
EBITDA and Adjusted EBITDA are used by analysts in the shipping industry as common performance measures to compare results across peers. EBITDA and Adjusted EBITDA are not items recognized by IFRS, and should not be considered in isolation or used as alternatives to profit for the period or any other indicator of our operating performance.
Our presentation of EBITDA and Adjusted EBITDA is intended to supplement investors’ understanding of our operating performance by providing information regarding our ongoing performance that exclude items we believe do not directly affect our core operations and enhancing the comparability of our ongoing performance across periods. Our management considers EBITDA and Adjusted EBITDA to be useful to investors because such performance measures provide information regarding the profitability of our core operations and facilitate comparison of our operating performance to the operating performance of our peers. Additionally, our management uses EBITDA and Adjusted EBITDA as measures when reviewing our operating performance. While we believe these measures are useful to investors, the definitions of EBITDA and Adjusted EBITDA used by us may not be comparable to similar measures used by other companies.
The table below presents the reconciliation between profit for the period to EBITDA and Adjusted EBITDA for the three month periods ended June 30, 2022 and 2021 and six months ended June 30, 2022 and 2021.
Adj usted net income and Adjusted Earnings per share
Adjusted net income is defined as Profit for the period attributable to the owners of the Company adjusted for reversal of impairment loss recognized on ships, impairment loss recognized on goodwill and intangibles, reversal of impairment loss recognized on right-of-use assets, impairment loss on net disposal group, loss on disposal of business, share based compensation and non-recurring expenditure. Adjusted Earnings per share represents this figure divided by the weighted average number of ordinary shares outstanding for the period.
Adjusted net income is used by management for forecasting, making operational and strategic decisions, and evaluating current company performance. It is also one of the inputs used to calculate the variable amount that will be returned to shareholders in the form of quarterly dividends and/or share repurchases. Adjusted net income is not recognized by IFRS, and should not be considered in isolation or used as alternatives to profit for the period or any other indicator of our operating performance.
Our presentation of Adjusted net income is intended to supplement investors’ understanding of our operating performance by providing information regarding our ongoing performance that exclude items we believe do not directly affect our core operations and enhancing the comparability of our ongoing performance across periods. We consider Adjusted net income to be useful to management and investors because it eliminates items that are unrelated to the overall operating performance and that may vary significantly from period to period. Identifying these elements will facilitate comparison of our operating performance to the operating performance of our peers. The definitions of Adjusted net income used by us may not be comparable to similar measures used by other companies.
The table below presents the reconciliation between Adjusted net income to Profit for the period attributable to the owners of the Company for the three month periods ended June 30, 2022 and 2021 and six months ended June 30, 2022 and 2021.
Headline earnings and Headline earnings per share
The Johannesburg Stock Exchange, or JSE, requires that we calculate and publicly disclose Headline earnings per share and diluted Headline earnings per share. Headline earnings per share is calculated using net income which has been determined based on IFRS. Accordingly, this may differ to the Headline earnings per share calculation of other companies listed on the JSE because such companies may report their financial results under a different financial reporting framework such as U.S. GAAP.
Headline earnings for the period represents profit for the period attributable to owners of the Company adjusted for the re-measurements that are more closely aligned to the operating or trading results as set forth below, and Headline earnings per share represents this figure divided by the weighted average number of ordinary shares outstanding for the period.
The table below presents a reconciliation between Profit for the period attributable to owners of the Company to Headline earnings for the three month periods ended June 30, 2022 and 2021 and six months ended June 30, 2022 and 2021.
Source: Grindrod Shipping
