Weaker Spot Markets Impact Grindrod Shipping’s Results

Grindrod Shipping Holdings Ltd., a global provider of maritime transportation services predominantly in the drybulk sector, today announced its second half (1) and full year 2023 earnings results for the period ended December 31, 2023.

Financial Highlights for the Second Half of the Year Ended December 31, 2023
• Revenues of $201.2 million
• Gross profit of $15.9 million
• Loss for the period and attributable to owners of the Company of $10.9 million, or $0.56 per ordinary share
• Adjusted net loss of $9.2 million, or $0.47 per ordinary share(2)
• Adjusted EBITDA of $24.8 million(2)
• Handysize and supramax/ultramax TCE per day of $10,182 and $13,849, respectively(2)

Financial Highlights for the Full Year Ended December 31, 2023
• Revenues of $387.1 million
• Gross profit of $39.4 million
• Loss for the period and attributable to owners of the Company of $9.6 million, or $0.49 per ordinary share
• Adjusted net loss of $7.9 million, or $0.41 per ordinary share(2)
• Adjusted EBITDA of $64.7 million(2)
• Handysize and supramax/ultramax TCE per day of $10,351 and $13,908, respectively(2)
• Period end cash and cash equivalents of $55.2 million and restricted cash of $8.7 million
Operational & Corporate Highlights for the Second Half of the Year ended December 31, 2023
• On July 11, 2023, we exercised the option to extend the firm charter-in period of the 2016-built supramax bulk carrier IVS Windsor for 12 months.
• On July 13, 2023, we announced an EGM to be held on August 10, 2023 to propose a capital reduction which would result in a total cash distribution to shareholders up to a maximum of $45.0 million.
• On July 17, 2023, we exercised the option to extend the firm charter-in period of the 2014-built supramax bulk carrier IVS Naruo for 12 months.
• On July 18, 2023, we entered into a contract to purchase the 2024-built handysize bulk carrier newbuilding for a price of $33.8 million (before costs) from Good Viscount (MI) Ltd (a wholly owned subsidiary of our parent company Taylor Maritime Investments Limited (“TMI”). The acquisition, which is at an agreed price consistent with two independent broker valuations obtained in connection with the transaction, was unanimously approved by the disinterested members of the Board.
• On July 24, 2023, we entered into a contract to purchase the 2011-built handysize bulk carrier, Steady Sarah, for a price of $15.0 million (before costs) from Billy (MI) Ltd (a wholly owned subsidiary of our parent company TMI). The acquisition, which is at an agreed price consistent with three independent broker valuations obtained in connection with the transaction, was unanimously approved by the disinterested members of the Board. We took delivery of the handysize bulk carrier on July 28, 2023.
• On August 4, 2023, we delivered the 2011-built handysize bulk carrier, IVS Orchard, to her new owners.
• On August 10, 2023, a special resolution was passed at an EGM for a capital reduction which would result in a total cash distribution up to a maximum of $45.0 million. The Company does not intend to declare any further dividends for 2023 in light of the cash distribution.
• On August 24, 2023, we entered into an en-bloc deal to sell the 2015-built ultramax bulk carrier, IVS Bosch Hoek and the 2016-built ultramax bulk carrier, IVS Hayakita, for $46.5 million (before costs). IVS Hayakita is a chartered-in vessel with a purchase option which we exercised on May 25, 2023. The vessels were delivered to the new owners on September 19 and September 25, 2023, respectively and approximately $10.0 million debt was repaid on the Company’s $114.1 million senior secured credit facility.
• On September 1, 2023, we exercised our option to extend the firm charter-in period of the 2020-built supramax bulk carrier, IVS Pebble Beach for 12 months at a pre-agreed fixed rate, starting from October 22, 2023.
• On September 14, 2023, we entered into a contract to sell the 2013-built handysize bulk carrier, IVS Merlion, for $11.6 million (before costs) with delivery to her new owners on November 29, 2023. This vessel is unencumbered.
• On September 25, 2023, we entered into two sale and purchase agreements to acquire the entire issued share capital of Tamar Ship Management Limited and Taylor Maritime Management Limited for a total consideration of approximately $11.8 million (before costs). The closing was subject to closing conditions.
• On September 27, 2023, we entered into a contract to sell the 2013-built handysize bulk carrier, IVS Raffles, for $11.6 million (before costs) with delivery to her new owners on November 16, 2023. This vessel is unencumbered.
• On September 29, 2023, we announced that the fully paid-up share capital would be reduced by $32.4 million and the Company would distribute cash in two tranches; the first distribution of $1.01598 per ordinary share, which was paid on October 26, 2023, and the second distribution of $0.63193 per ordinary share, paid on December 11, 2023, to all shareholders of record as of October 20, 2023.
• On October 3, 2023, we announced that the completion conditions included in the two sale and purchase agreements for the acquisition of the entire issued share capital of Tamar Ship Management Limited and Taylor Maritime Management Limited had been met. The acquisition became legally effective on October 3, 2023.
• On November 7, 2023, we exercised our option to extend the firm charter-in period of the 2020-built supramax bulk carrier, IVS Atsugi for 12 months at a pre-agreed fixed rate, starting from approximately December 30, 2023.
• On November 13, 2023, we exercised the purchase option on the 2014-built supramax bulk carrier IVS Naruo for approximately $12.0 million with delivery expected to take place on or before June 30, 2024. We can provide no assurances that the delivery will take place by that time or at all.
• On November 16, 2023, we delivered the 2013-built handysize bulk carrier, IVS Raffles, to her new owners.
• On November 29, 2023, we delivered the 2013-built handysize bulk carrier, IVS Merlion, to her new owners.
• On December 7, 2023, we announced the resignation of Mr. Charles Goodson Maltby as a non-executive director of the Company with effect from December 31, 2023 and the formation of a new Safety and Technical Committee.
• On December 11, 2023, we completed the second tranche of the share capital reduction with a distribution of $0.63193 per ordinary share to all shareholders on record as of October 20, 2023.
• On December 11, 2023, we entered into agreements to charter-in two ultramax drybulk vessels. The vessels are expected to be delivered in Q1 2024 and Q2 2024 and will be chartered-in for a minimum of one year.
• On December 22, 2023, we extended the firm charter-in period of the 2014-built supramax bulk carrier IVS Crimson Creek for approximately 12 to 15 months.
Recent Developments
• On January 17, 2024, we entered into a contract to sell the 2007-built handysize bulk carrier, IVS Kingbird, for $10.4 million (before costs), effectively a 1.1% premium to carrying value with delivery to her new owners on February 1, 2024. This vessel is unencumbered.
• On February 6, 2024, we took delivery of the HB Imabari, a handysize bulk carrier built in Japan. We finalized and drew down $20.2 million in financing with IYO Bank in conjunction with the delivery.
• On February 23, 2024, we entered into a contract to sell the 2012-built handysize bulk carrier, IVS Ibis, for $11.7 million (before costs) with delivery to her new owners planned on or about March 21, 2024. We can provide no assurances that the delivery will take place by that time or at all.
As of February 22, 2024, we have contracted the following TCE per day for the first quarter of 2024 (1):
• Handysize: approximately 1,274 operating days(2) at an average TCE per day of approximately $11,875
• Supramax/ultramax: approximately 1,004 operating days(2) at an average TCE per day of approximately $14,795

CEO Commentary
Edward Buttery, the Chief Executive Officer, commented:
“Following TMI’s acquisition in December 2022, the priority for 2023 was deleveraging to strengthen the balance sheet while maintaining an attractive fleet of modern, efficient geared bulk carriers. I am pleased with the progress the Company made despite challenging market conditions. We reduced our interest-bearing debt by $56.9 million during 2023, reducing yearly interest payments by $1.9 million. During this time, we have also been improving cost efficiencies across the fleet, the benefits of which should be evident by the end of this year. There remains plenty to do in 2024 and I think we are well positioned to achieve our goals against a backdrop of a more favourable market outlook. We’re encouraged by the recent positive market momentum.”

Unaudited Results for the Six Months Ended December 31, 2023 and 2022
Revenue was $201.2 million for the six months ended December 31, 2023 and $188.6 million for the six months ended December 31, 2022. Vessel revenue was $116.5 million for the six months ended December 31, 2023 and $188.2 million for the six months ended December 31, 2022. Revenue increased due to ship sale revenue generated from the sale of three handysize and two supramax/ultramax vessels in the second half of 2023 compared to no sales for the same period in 2022. This was partially offset by decreased vessel revenue due to weakening market conditions in the drybulk business.

Our handysize total revenue and supramax/ultramax total revenue was $79.9 million and $118.5 million, respectively, for the six months ended December 31, 2023, and $71.1 million and $117.5 million, respectively, for the six months ended December 31, 2022. Handysize vessel revenue and supramax/ultramax vessel revenue was $45.4 million and $71.1 million, respectively, for the six months ended December 31, 2023, and $70.9 million and $117.4 million, respectively, for the six months ended December 31, 2022. The results for the six months ended December 31, 2023 were negatively impacted by weaker spot markets. Handysize ship sale revenue and supramax/ultramax ship sale revenue was $34.5 million and $47.4 million, respectively, for the six months ended December 31, 2023, reflecting the sale of three handysize and two supramax/ultramax vessels in the second half of 2023 compared to no sales for the same period in 2022.

Handysize TCE per day was $10,182 per day for the six months ended December 31, 2023 and $19,161 per day for the six months ended December 31, 2022. Supramax/ultramax TCE per day was $13,849 per day for the six months ended December 31, 2023 and $23,685 per day for the six months ended December 31, 2022.

Cost of sales was $185.4 million for the six months ended December 31, 2023 and $127.1 million for the six months ended December 31, 2022. Cost of sales increased primarily as a result of the sale of three handysize and two supramax/ultramax vessels in the second half of 2023 compared to no sales for the same period in 2022. This was partially offset by a decrease in vessel operating costs and depreciation of ships, drydocking and plant and equipment-owned assets due to the sale of five handysize and four supramax/ultramax vessels concluded in 2023 compared to no ship sales in these segments in 2022.

Our handysize segment and supramax/ultramax segment cost of sales was $77.6 million and $109.2 million, respectively, for the six months ended December 31, 2023 and $48.3 million and $80.5 million, respectively, for the six months ended December 31, 2022. Cost of sales increased in the handysize segment due to the sale of three handysize vessels in the second half of 2023 compared to no sales for the same period in 2022, which was partially offset by a decrease in vessel operating costs and depreciation of ships, drydocking and plant and equipment-owned assets as a result of the vessels sold during the year. Cost of sales increased in the supramax/ultramax segment due to the sale of two supramax/ultramax vessels in the second half of 2023 compared to no ship sales for the same period in 2022, partially offset by a decrease in vessel operating costs and depreciation of ships, drydocking and plant and equipment-owned assets as a result of the vessels sold during the year.

Handysize voyage expenses and supramax/ultramax voyage expenses were $12.8 million and $26.0 million, respectively, for the six months ended December 31, 2023 and $15.8 million and $28.9 million, respectively, for the six months ended December 31, 2022. Handysize charter hire expense and supramax/ultramax charter hire expense were $10.1 million and $9.6 million, respectively, for the six months ended December 31, 2023 and $6.2 million and $18.2 million, respectively, for the six months ended December 31, 2022. The decrease in the supramax/ultramax segment was as a result of a decrease in short term charters due to the reduction in demand for drybulk vessels in 2023. Handysize vessel operating costs and supramax/ultramax vessel operating costs were $13.1 million and $7.7 million, respectively, for the six months ended December 31, 2023, and $16.8 million and $9.6 million, respectively, for the six months ended December 31, 2022. Handysize vessel operating costs per day were $5,650 per day for the six months ended December 31, 2023 and $6,086 per day for the six months ended December 31, 2022. Vessel operating costs per day were lower in the handysize segment for the six months ended December 31, 2023 in comparison to the six months ended December 31, 2022 due to lower maintenance as a result of the sale of older vessels, partially offset by costs required to manage ongoing repairs while we transition away from two and a half year intermediary drydocks to five year drydocks, reducing capital expenditure. Supramax/ultramax vessel operating costs were $5,624 per day for the six months ended December 31, 2023 and $5,260 per day for the six months ended December 31, 2022. Vessel operating costs per day were higher in the supramax/ultramax segment for the six months ended December 31, 2023 in comparison to the six months ended December 31, 2022 due to increased costs required to manage ongoing repairs while we transition away from two and a half year intermediary drydocks to five year drydocks, reducing capital expenditure.

Gross profit was $15.9 million for the six months ended December 31, 2023 and $61.5 million for the six months ended December 31, 2022.

Other operating expense was $1.5 million for the six months ended December 31, 2023 and $3.4 million for the six months ended December 31, 2022. Other operating expense included a reversal of an impairment loss on assets under construction of $0.3 million and an impairment loss on ships of $2.0 million for the six months ended December 31, 2023. Other operating expense included an impairment loss on ships of $2.4 million and an impairment on a right-of-use asset of $1.0 million for the six months ended December 31, 2022.

Administrative expense was $18.6 million for the six months ended December 31, 2023 and $32.2 million for the six months ended December 31, 2022. The decrease was due to $10.3 million in fees and expenses associated with the tender offer to shareholders to purchase their shares that was completed in the second half of 2022 and $6.7 million of expense associated with the settlement of the forfeitable share plan that was terminated as part of the transaction agreement.

Interest income was $1.8 million for the six months ended December 31, 2023 and $2.0 million for the six months ended December 31, 2022.

Interest expense was $8.1 million for the six months ended December 31, 2023 and $9.8 million for the six months December 31, 2022. The reduction was due to maturity of two loans during the year and repayment of loans as a result of vessels sold during the current year.

Income tax expense was $0.4 million for the six months ended December 31, 2023 and $0.5 million for the six months ended December 31, 2022.

Loss for the six months ended December 31, 2023 was $10.8 million compared to a profit of $17.6 million for the six months ended December 31, 2022.

Unaudited Results for the Full Years Ended December 31, 2023 and 2022
Revenue was $387.1 million for the year ended December 31, 2023 and $460.5 million for year ended December 31, 2022. Vessel revenue was $226.0 million for the year ended December 31, 2023 and $430.0 million for the year ended December 31, 2022. Revenue decreased due to weakening market conditions in the drybulk business, partially offset by the sale of five handysize and four supramax/ultramax vessels compared to the sale of a medium range tanker in the first half of 2022 (included in the Other segment under a bareboat charter).

Our handysize total revenue and supramax/ultramax total revenue was $151.8 million and $232.5 million, respectively, for the year ended December 31, 2023 and $159.9 million and $268.5 million, respectively, for the year ended December 31, 2022. Handysize vessel revenue and supramax/ultramax vessel revenue was $87.9 million and $138.1 million, respectively, for the year ended December 31, 2023 and $159.5 million and $268.4 million, respectively, for the year ended December 31, 2022. The results were negatively impacted by the weaker spot market rates. Handysize ship sale revenue and supramax/ultramax ship sale revenue was $63.8 million and $94.3 million, respectively, for the year ended December 31, 2023 due to the sale of five handysize and four supramax/ultramax vessels compared to no ship sales in these segments for the same period in 2022.

Handysize TCE per day was $10,351 per day for the year ended December 31, 2023 and $22,115 per day for the year ended December 31, 2022. Supramax/ultramax TCE per day was $13,908 per day for the year ended December 31, 2023 and $25,788 per day for the year ended December 31, 2022.

Cost of sales was $347.7 million for the year ended December 31, 2023 and $293.7 million for the year ended December 31, 2022. The increased costs are primarily as a result of the sale of five handysize and four supramax/ultramax vessels in 2023 compared to the sale of one medium range tanker for the same period in 2022 (included in the Other segment under a bareboat charter), which was partially offset by income from forward freight agreements in 2022 and lower spot charter-in rates on the decreasing number of short-term charters during the twelve months of 2023.

In the drybulk business, our handysize segment and supramax/ultramax segment cost of sales was $142.5 million and $208.2 million, respectively, for the year ended December 31, 2023 and $93.4 million and $172.6 million, respectively, for the year ended December 31, 2022.

Our handysize voyage expenses and supramax/ultramax voyage expenses was $25.4 million and $49.3 million, respectively, for the year ended December 31, 2023 and $30.7 million and $60.4 million, respectively, for the year ended December 31, 2022. Handysize charter hire expenses and supramax/ultramax charter hire expenses were $13.3 million and $13.6 million for the year ended December 31, 2023 and $12.1 million, and $46.8 million for the year ended December 31, 2022. The decrease in the supramax/ultramax segment was as a result of a decrease in short term charter-in vessels due to the reduction in demand for drybulk vessels in 2023.

Handysize vessel operating costs and supramax/ultramax vessel operating costs were $28.8 million and $16.9 million for the year ended December 31, 2023 and $31.6 million, and $18.2 million for the year ended December 31, 2022. Handysize vessel operating costs per day were $5,841 per day for the year ended December 31, 2023 and $5,776 per day for the year ended December 31, 2022. These increases were primarily due to increased cost of lubricating oils, increased repairs to certain of the older vessels and additional crew to manage ongoing repairs as we transition away from two and a half year intermediary drydocks to five year drydocks, reducing capital expenditure. Supramax/ultramax vessel operating costs per day were $5,616 per day for the year ended December 31, 2023 and $5,297 per day for the year ended December 31, 2022.

These increases were primarily due to increased cost of lubricating oils, increased repairs on a small number of vessels and additional crew to manage ongoing repairs as we transition away from two and a half year intermediary drydocks to five year drydocks, reducing capital expenditure.

Gross profit was $39.4 million for the year ended December 31, 2023 and $166.8 million for the year ended December 31, 2022.

Other operating (expense) income was an expense of $1.4 million for the year ended December 31, 2023 and income of $0.3 million for the year ended December 31, 2022. The other operating expense is primarily due to the impairment loss on vessels sold during the year ended December 31, 2023.

Administrative expense was $32.7 million for the year ended December 31, 2023 and $48.1 million for the year ended December 31, 2022. The decrease was due to $10.3 million in fees and expenses associated with the tender offer to shareholders to purchase their shares that was completed in the second half of 2022 and $8.1 million of expense associated with the settlement of the forfeitable share plan that was terminated as part of the transaction agreement.

Interest income was $2.8 million for the year ended December 31, 2023 and $2.2 million for the year ended December 31, 2022.

Interest expense was $17.1 million for the year ended December 31, 2023 and $17.1 million for the year ended December 31, 2022.

Income tax expense was $0.7 million for the year ended December 31, 2023 and $0.8 million for the year ended December 31, 2022.

Loss for the year ended December 31, 2023 was $9.6 million and a profit of $103.4 million for the year ended December 31, 2022.
Net cash flows generated from operating activities was $155.1 million for the year ended December 31, 2023 and $186.0 million for the year ended December 31, 2022. Net cash generated from investing activities was $1.2 million for the year ended December 31, 2023 and was $0.1 million for the year ended December 31, 2022. Net cash flows used in financing activities was $147.5 million for the year ended December 31, 2023 and $243.1 million for the year ended December 31, 2022.
As of December 31, 2023, we had cash and cash equivalents of $55.2 million and restricted cash of $8.7 million.
Source: Grindrod Shipping