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Grindrod Shipping Holdings Ltd. Reports Third Quarter Revenues of $107.2 Million

Grindrod Shipping Holdings Ltd., a global provider of maritime transportation services predominantly in the drybulk sector, announced its earnings results for the three months and the nine months ended September 30, 2022.

Financial Highlights for the Three Months Ended September 30, 2022

  • Revenues of $107.2 million
  • Gross profit of $38.5 million
  • Profit for the period attributable to owners of the Company of $22.2 million, or $1.17 per ordinary share
  • Adjusted net income of $27.3 million, or $1.44 per ordinary share(1)
  • Adjusted EBITDA of $47.8 million(1)
  • Handysize and supramax/ultramax TCE per day of $23,257 and $25,645, respectively(1)

Financial Highlights for the Nine Months Ended September 30, 2022

  • Revenues of $379.1 million
  • Gross profit of $143.8 million
  • Profit for the period attributable to owners of the Company of $107.9 million, or $5.72 per ordinary share
  • Adjusted net income of $110.4 million, or $5.85 per ordinary share(1)
  • Adjusted EBITDA of $171.9 million(1)
  • Handysize and supramax/ultramax TCE per day of $24,396 and $27,015, respectively(1)
  • Period end cash and cash equivalents of $140.8 million and restricted cash of $9.8 million

Operational Highlights for the Three Months Ended September 30, 2022

  • On July 25, 2022, we purchased the 2015-built supramax bulk carrier, IVS Pinehurst for an amount of $18.0 million.
  • On September 14, 2022, we exercised the option to extend the firm charter-in period of the 2020-built supramax bulk carrier IVS Pebble Beach for 12 months at $12,950/day, starting from approximately October 15, 2022.
  • On September 21, 2022, we exercised the option to extend the firm charter-in period of the 2014-built supramax bulk carrier IVS Naruo for 12 months at $13,000/day, starting from approximately January 21, 2023.

Recent Developments

  • On October 11, 2022, we exercised the option to extend the firm charter-in period of the 2020-built supramax bulk carrier IVS Atsugi for 12 months at $12,950/day, starting from approximately December 23, 2022.
  • On October 12, 2022, the Company announced that we have entered into a transaction implementation agreement among the Company, Taylor Maritime Investments Limited (“TMI”) and Good Falkirk (MI) Limited, a wholly-owned subsidiary of TMI (the “Offeror”), providing for a voluntary conditional cash offer (the “Offer”) to be made by the Offeror for all of the issued ordinary shares (the “Shares”) in the capital of the Company (other than Shares held by the Offeror and Shares held in treasury) (the “Offer Shares”).
  • The Company does not intend to declare any further dividends for 2022 prior to the consummation of the Offer after the initial offer period. In connection with the consummation of the Offer following the initial offer period, the Company’s Board of Directors may be reconstituted such that all of the directors (other than two current independent directors of the Company) will be persons designated by TMI. After the consummation of the Offer and immediately following the initial offer period, all decisions with respect to whether to declare and pay any future dividends (and, if so, the amount of any such dividend) will be made by the reconstituted Company Board as it may determine in its sole discretion. There is no guarantee that the Company Board will declare or pay any dividends after the consummation of the Offer and immediately following the initial offer period and, if it determines to do so, the amount or timing of any such dividends.

As of November 10, 2022, we have contracted the following TCE per day for the fourth quarter of 2022 (1):

  • Handysize: approximately 959 operating days(2) at an average TCE per day of approximately $15,688
  • Supramax/ultramax: approximately 1,455 operating days(2) at an average TCE per day of approximately $22,850
  • CEO Commentary

Stephen Griffiths, the Interim Chief Executive Officer and Chief Financial Officer of Grindrod Shipping, commented:

“Our results for the third quarter of 2022 were quite strong overall, though lower sequentially relative to the second quarter of 2022 as charter rates persistently declined over the course of the quarter. For the third quarter of 2022, we achieved $47.8 million of Adjusted EBITDA and $27.3 million of Adjusted net income, or $1.44 per ordinary share from continuing operations. Handysize and supramax/ultramax TCE per day were $23,257 and $25,645, respectively, for the third quarter of 2022. While supply fundamentals have remained intact with a low orderbook persisting due to uncertainty surrounding new engine technology and emissions controls, trade demand appears to have softened so far this year. In the first half of the year, minor bulks were the only major category of drybulk cargoes to remain positive from a cargo growth perspective, but they too contracted in the third quarter. Our vessels continued to outperform the larger drybulk vessel classes during the quarter and year to date periods and have delivered robust free cash flows for the Company, further strengthening our balance sheet.”

Unaudited Results for the Three Months Ended September 30, 2022 and 2021

Continuing Operations

Revenue was $107.2 million for the three months ended September 30, 2022 and $135.1 million for the three months ended September 30, 2021. Vessel revenue was $107.0 million for the three months ended September 30, 2022 and $135.0 million for the three months ended September 30, 2021. Revenue decreased due to weakening market conditions in the drybulk business and a reduction in short-term operating days due to the redelivery of the short-term vessels that were chartered-in during a weaker market and were not extended due to reduced demand for drybulk tonnage brought about by global recession, high interest rates and continued shutdowns in China.

Our handysize total revenue and supramax/ultramax total revenue was $43.6 million and $63.6 million, respectively, for the three months ended September 30, 2022, and $46.6 million and $87.3 million, respectively, for the three months ended September 30, 2021. Handysize vessel revenue and supramax/ultramax vessel revenue was $43.5 million and $63.5 million, respectively, for the three months ended September 30, 2022, and $46.5 million and $87.3 million, respectively, for the three months ended September 30, 2021. The results for the three months ended September 30, 2022 were negatively impacted by lower TCE per day rates achieved in our handysize and supramax/ultramax drybulk carrier segments, reflecting the weaker spot markets in these segments which was additionally impacted by a reduction in short-term operating days.

Handysize TCE per day was $23,257 per day for the three months ended September 30, 2022 and $25,919 per day for the three months ended September 30, 2021. Supramax/ultramax TCE per day was $25,645 per day for the three months ended September 30, 2022 and $29,934 per day for the three months ended September 30, 2021.

Cost of sales was $68.7 million for the three months ended September 30, 2022 and $73.2 million for the three months ended September 30, 2021. The decrease was primarily due to the decrease in short-term operating days for supramax/ultramax resulting in decreased voyage expenses and short-term charter hire expenses.

Our handysize segment and supramax/ultramax segment cost of sales was $25.9 million and $43.7 million, respectively, for the three months ended September 30, 2022 and $21.4 million and $52.1 million, respectively, for the three months ended September 30, 2021.

Handysize voyage expenses and supramax/ultramax voyage expenses were $7.6 million and $15.8 million, respectively, for the three months ended September 30, 2022 and $6.6 million and $19.7 million, respectively, for the three months ended September 30, 2021. Handysize charter hire and supramax/ultramax charter hire were $5.7 million and $11.9 million, respectively, for the three months ended September 30, 2022 and $3.5 million and $17.5 million, respectively, for the three months ended September 30, 2021. Handysize vessel operating costs and supramax/ultramax vessel operating costs were $8.1 million and $4.6 million, respectively, for the three months ended September 30, 2022, and $7.9 million and $4.0 million, respectively, for the three months ended September 30, 2021. Handysize vessel operating costs per day were $5,883 per day for the three months ended September 30, 2022 and $5,707 per day for the three months ended September 30, 2021. Vessel operating costs per day were higher in the handysize drybulk carrier segment for the three months ended September 30, 2022 in comparison to the three months ended September 30, 2021 due to crew repatriation that was timed differently to the previous year. Supramax/ultramax vessel operating costs per day were $5,105 per day for the three months ended September 30, 2022 and $5,306 per day for the three months ended September 30, 2021. Vessel operating costs per day decreased for the three months ended September 30, 2022 in comparison to the three months ended September 30, 2021 due to crew repatriation that was timed differently to the previous year.

The long-term charter-in cost per day for our supramax/ultramax fleet was $15,039 per day during the three months ended September 30, 2022 and $12,858 per day for the three months ended September 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 September 30, 2022, out of 1,861 operating days in the supramax/ultramax segment, 74.5% were fulfilled with owned/long-term chartered-in vessels and the remaining 25.5% with short-term chartered-in vessels compared to 2,258 operating days in the supramax/ultramax segment, 61.6% were fulfilled with owned/long-term chartered-in vessels and the remaining 38.4% with short-term chartered-in vessels for the three months ended September 30, 2021.

Gross profit was $38.5 million for the three months ended September 30, 2022 and $62.0 million for the three months ended September 30, 2021.

Other operating income was $0.1 million for the three months ended September 30, 2022 and $0.3 million for the three months ended September 30, 2021.

Administrative expense was $12.5 million for the three months ended September 30, 2022 and $10.6 million for the three months ended September 30, 2021. The increase was due to the fees associated with the offer to shareholders to purchase their shares during the current year, higher insurance costs and higher staff incentive costs.

Interest income was $0.6 million for the three months ended September 30, 2022 and $0.0 million for the three months ended September 30, 2021.

Interest expense was $4.4 million for the three months ended September 30, 2022 and $2.4 million for the three months ended September 30, 2021.

Income tax expense was $0.1 million for the three months ended September 30, 2022 and $0.0 million for the three months ended September 30, 2021.

Profit for the three months ended September 30, 2022 was $22.2 million compared to $49.3 million for the three months ended September 30, 2021.

Profit attributable to owners of the Company for the three months ended September 30, 2022 was $22.2 million compared to $44.2 million for the three months ended September 30, 2021.

Continuing and Discontinued Operation

Profit for the three months ended September 30, 2022 was $22.2 million compared to $49.1 million for the three months ended September 30, 2021.

Profit attributable to owners of the Company for the three months ended September 30, 2022 was $22.2 million compared to $44.0 million for the three months ended September 30, 2021.

Unaudited Results for the nine months ended September 30, 2022 and 2021

Continuing Operations

Revenue was $379.1 million for the nine months ended September 30, 2022 and $313.4 million for the nine months ended September 30, 2021. Vessel revenue was $348.7 million for the nine months ended September 30, 2022 and $312.9 million for the nine months ended September 30, 2021. Revenue increased due to improved market conditions in the drybulk business mainly in the first half of the year which was slightly offset by a reduction in short-term supramax/ultramax 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 $132.5 million and $214.6 million, respectively, for the nine months ended September 30, 2022, and $107.6 million and $201.7 million, respectively, for the nine months ended September 30, 2021. Handysize vessel revenue and supramax/ultramax vessel revenue was $132.1 million and $214.5 million, respectively, for the nine months ended September 30, 2022, and $107.2 million and $201.7 million, respectively, for the nine months ended September 30, 2021. The results for the nine months ended September 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 mainly in the first half of the year which was slightly offset by a reduction in supramax/ultramax short-term operating days.

Handysize TCE per day was $24,396 per day for the nine months ended September 30, 2022 and $18,847 per day for the nine months ended September 30, 2021. Supramax/ultramax TCE per day was $27,015 per day for the nine months ended September 30, 2022 and $21,514 per day for the nine months ended September 30, 2021.

Cost of sales was $235.3 million for the nine months ended September 30, 2022 and $203.2 million for the nine months ended September 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 on handysize vessels which was slightly offset by a decrease in short-term operating days for supramax/ultramax vessels.

In the drybulk business, our handysize segment and supramax/ultramax segment cost of sales was $71.0 million and $135.8 million, respectively, for the nine months ended September 30, 2022 and $63.0 million and $141.0 million, respectively, for the nine months ended September 30, 2021.

Handysize voyage expenses and supramax/ultramax voyage expenses were $22.5 million and $47.3 million, respectively, for the nine months ended September 30, 2022 and $20.7 million and $48.4 million, respectively, for the nine months ended September 30, 2021. Handysize vessel operating costs and supramax/ultramax vessel operating costs were $22.9 million and $13.3 million, respectively, for the nine months ended September 30, 2022, and $23.1 million and $11.5 million, respectively, for the nine months ended September 30, 2021. Handysize vessel operating costs per day remained relatively flat at $5,603 per day for the nine months ended September 30, 2022 and $5,638 per day for the nine months ended September 30, 2021. Supramax/ultramax vessel operating costs per day remained relatively flat at $5,255 per day for the nine months ended September 30, 2022 and $5,244 per day for the nine months ended September 30, 2021.

The long-term charter-in costs per day for our supramax/ultramax fleet was $14,022 per day during the nine months ended September 30, 2022 and $12,690 per day for the nine months ended September 30, 2021. The increase is due to the extension of a charter agreement in May 2022 at a higher rate. During the nine months ended September 30, 2022, out of 6,189 operating days in the supramax/ultramax segment, 68.6% were fulfilled with owned/long-term chartered-in vessels and the remaining 31.4% with short-term chartered-in vessels compared to 7,122 operating days in the supramax/ultramax segment, 58.8% were fulfilled with owned/long-term chartered-in vessels and the remaining 41.2% with short-term chartered-in vessels for the nine months ended September 30, 2021.

Gross profit was $143.8 million for the nine months ended September 30, 2022 and $110.2 million for the nine months ended September 30, 2021.

Other operating income was $3.8 million for the nine months ended September 30, 2022 and $3.7 million for the nine months ended September 30, 2021.

Administrative expense was $28.4 million for the nine months ended September 30, 2022 and $24.8 million for the nine months ended September 30, 2021. Administrative expense increased in the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 due to the fees associated with the offer to shareholders to purchase their shares during the current year, higher insurance costs and higher staff incentive costs.

Interest income was $0.8 million for the nine months ended September 30, 2022 and $0.1 million for the nine months ended September 30, 2021.

Interest expense was $11.8 million for the nine months ended September 30, 2022 and $9.5 million for the nine months ended September 30, 2021.

Income tax (expense) benefit was an expense of $0.4 million for the nine months ended September 30, 2022 and a benefit of $0.1 million for the nine months ended September 30, 2021.

Profit for the nine months ended September 30, 2022 was $107.9 million and $79.8 million for the nine months ended September 30, 2021.

Profit attributable to owners of the Company for the nine months ended September 30, 2022 was $107.9 million and $69.2 million for the nine months ended September 30, 2021.

Continuing and Discontinued Operation

Profit for the nine months ended September 30, 2022 was $107.9 million compared to a profit of $76.7 million for the nine months ended September 30, 2021.

Profit attributable to owners of the Company for nine months ended September 30, 2022 was $107.9 million compared to $66.1 million for the nine months ended September 30, 2021.

Net cash flows generated from operating activities was $168.3 million for the nine months ended September 30, 2022 and $136.6 million for the nine months ended September 30, 2021. Net cash generated from (used in) investing activities was an inflow of $0.1 million for the nine months ended September 30, 2022 and an outflow of $46.3 million for the nine months ended September 30, 2021. Net cash flows used in financing activities was $130.5 million for the nine months ended September 30, 2022 and $51.8 million for the nine months ended September 30, 2021.

As of September 30, 2022, we had cash and equivalents of $140.8 million and restricted cash of $9.8 million.

During the nine months ended September 30, 2021, cash flows relating to the discontinued operation of the tanker business were cash generated from operating activities of $22,424,000, cash generated by investing activities of $210,000 and cash used in financing activities $26,249,000. There is no discontinued operation during the nine months ended September 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.

Below is a reconciliation from TCE revenue to revenue for the three month period ended September 30, 2022 and 2021.

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 period ended September 30, 2022 and 2021.

EBITDA and Adjusted 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 from continuing operations to EBITDA from continuing operations and Adjusted EBITDA from continuing operations for the three month period ended September 30, 2022 and 2021 and nine months ended September 30, 2022 and 2021.

Adjusted 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.

Full Report

Source: Grindrod Shipping

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