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Grindrod Reports Third Quarter Profit of $49 Million

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

Financial Highlights for the three months Ended September 30, 2021

• Revenues of $135.1 million

• Gross profit of $62.0 million

• Profit for the period of $49.1 million

• Profit for the period attributable to owners of the Company of $44.0 million, or $2.29 per ordinary share

• Adjusted net income of $45.8 million, or $2.38 per ordinary share(1)

• Adjusted EBITDA of $69.0 million(1)

• Repurchased a combined total of 91,871 ordinary shares in the open market on NASDAQ and the JSE at an average price of $14.87 per share

• Handysize and supramax/ultramax TCE per day of $25,919 and $29,934, respectively(1)

Financial Highlights for the nine months Ended September 30, 2021

• Revenues of $366.4 million

• Gross profit of $110.2 million

• Profit for the period of $76.7 million

• Profit for the period attributable to owners of the Company of $66.1 million, or $3.44 per ordinary share

• Adjusted net income of $67.3 million, or $3.50 per ordinary share(1)

• Adjusted EBITDA of $131.5 million(1)

• Repurchased a combined total of 125,338 ordinary shares in the open market on NASDAQ and the JSE at an average price of $13.16 per share.

• Handysize and supramax/ultramax TCE per day of $18,847 and $21,514, respectively(1)

• Period end cash and cash equivalents of $76.1 million and restricted cash of $9.0 million

(1) Adjusted EBITDA, Adjusted net income 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 three months Ended September 30, 2021

• The Company exercised its option to extend the firm charter-in period of the 2015-built supramax bulk carrier IVS Pinehurst for 11 to 13 months at $10,000/day, starting from approximately January 3, 2022.

• On September 1, 2021, the acquisition of the remaining 31.14% equity stake in its IVS Bulk joint venture (“IVS Bulk”) and concurrent redemption of the IVS Bulk preference shares were concluded.

• On September 15, 2021, the Company amended one of its existing credit facilities to drawdown an additional $23.0 million to fund the IVS Bulk acquisition described above.

• On September 16, 2021, the Company completed the acquisition of the 2019 Japanese-built ultramax bulk carrier IVS Phoenix for $23.5 million and the concurrent financing for $25.0 million.

Recent Developments

• On November 17, 2021, the Company’s Board of Directors declared an interim quarterly cash dividend of $0.72 per ordinary share, payable on or about December 13, 2021, to all shareholders of record as of December 3, 2021 (the “Record Date”). As of November 17, 2021, there were 19,185,352 common shares of the Company outstanding (excluding treasury shares). The dividend is the first dividend declared under the Company’s recently announced capital return policy and represents approximately 30% of the Company’s net income for the third quarter of 2021, as adjusted for certain extraordinary items and after deducting the $1.4 million of shares repurchased during the quarter.

In view of the Record Date of December 3, 2021, shareholders may not reposition shares between the JSE and the U.S. Register during the period from December 1, 2021, at 9.00 a.m. (South African time) until December 6, 2021at 9.00 a.m. (South African time).

The Company exercised its 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, 2022.

As of November 14, 2021, we have contracted the following TCE per day for the fourth quarter of 2021 (1):

Handysize: approximately 1,205 operating days(2) at an average TCE per day of approximately $30,265

Supramax/ultramax: approximately 1,579 operating days(2) at an average TCE per day of approximately $33,102

(1) TCE per day is a non-GAAP financial measure. For the definition of this non-GAAP financial measure and the reconciliation of this measure 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.
(2) Operating days: the number of available days in the relevant period a vessel is controlled by us after subtracting the aggregate number of days that the vessel is off-hire due to a reason other than scheduled drydocking and special surveys, including unforeseen circumstances. We use operating days to measure the aggregate number of days in a relevant period during which vessels are actually available to generate revenue.

CEO Commentary

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

“During the third quarter of 2021, Grindrod Shipping achieved stronger results taking full advantage of the robust market conditions and our expanded owned fleet following the acquisition of the remaining portion of our IVS Bulk subsidiary. We generated Gross Profit, Profit for the period attributable to owners of the Company, Adjusted EBITDA and Adjusted Net Income of $62.0 million, $44.0 million, $69.0 million, and $45.8 million, respectively. We are particularly pleased to announce the declaration of our first quarterly cash dividend of $0.72 per ordinary share under our new dividend and capital return policy of returning approximately 30% of our Adjusted Net Income to our shareholders through a combination of share repurchase and dividends.

Today, Grindrod Shipping is strategically positioned to benefit from the robust dry bulk market. With an average age of six years, our Fleet consists of approximately 70% “Eco” vessels built predominantly in Japan, and is, we believe, among the youngest and most efficient in the industry, with distinct commercial and operational advantages. In addition, our dynamic and flexible commercial strategy of opportunistically chartering-in vessels at attractive rates on both long- and short-term time charters with extension options improves our ability to service our cargo contracts and realise potential earnings and profitability with contracted rates which are at levels significantly below the current spot rates. We were also able to generate additional revenue during the period from our short-term fleet, with several vessels that were opportunistically chartered-in during 2020 at rates well below current spot rates. The original charters contained fixed rate extension options which continue to benefit the profitability of the Company.

Furthermore, as also disclosed, we hold purchase options for five of our long-term chartered-in vessels, below their prevailing market values, thereby presenting us with highly attractive options to grow our owned fleet. The recent acquisition and financing of the IVS Phoenix during the quarter is a prime example of the advantages and benefits of this strategy.

Finally, we were pleased to complete the Company’s first capital markets secondary offering since our spin-off and listing in 2018. The Company did not sell any shares in the offering, but it has benefited from increased daily trading liquidity, has a stronger US institutional shareholder base, and increased market float in the US, which has now reached over 37% of shares outstanding, as of October 2021.”

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

Revenue was $135.1 million for the three months ended September 30, 2021 and $53.9 million for the three months ended September 30, 2020. Vessel revenue was $135.1 million for the three months ended September 30, 2021 and $48.3 million for the three months ended September 30, 2020 due to improved market conditions in the drybulk business.

In the drybulk business, handysize total revenue and supramax/ultramax total revenue was $46.6 million and $87.3 million, respectively, for the three months ended September 30, 2021, and $22.2 million and $26.3 million, respectively, for the three months ended September 30, 2020. Handysize vessel revenue and supramax/ultramax vessel revenue was $46.5 million and $87.3 million, respectively, for the three months ended September 30, 2021, and $16.8 million and $26.2 million, respectively, for the three months ended September 30, 2020. The results for the third quarter of 2021 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.

In the medium range and small tanker segments, we did not generate any revenue for the three months ended September 30, 2021 due to the sale of the remaining small tanker and two medium range tankers in the second quarter of 2021 as we largely divested from the tanker business to focus on the drybulk segments. Our medium range tankers and small tankers total revenues for the three months ended September 30, 2020 were $1.9 million and $2.0 million, respectively. Medium range tankers and small tankers vessel revenues were $1.9 million and $2.0 million, respectively for the three months ended September 30, 2020.

Handysize TCE per day was $25,919 per day for the three months ended September 30, 2021 and $6,713 per day for the three months ended September 30, 2020. Supramax/ultramax TCE per day was to $29,934 per day for the three months ended September 30, 2021 and $10,831 per day for the three months ended September 30, 2020.

Cost of sales was $73.1 million for the three months ended September 30, 2021 and $52.3 million for the three months ended September 30, 2020. Cost of sales increased due to higher charter hire costs incurred for our short-term chartered-in vessels as drybulk spot charter rates increased significantly during 2021.

In the drybulk business, our handysize segment and supramax/ultramax segment cost of sales was $21.4 million and $52.1 million, respectively, for the three months ended September 30, 2021 and $24.2 million and $25.8 million, respectively, for the three months ended September 30, 2020.

Handysize voyage expenses and supramax/ultramax voyage expenses were $6.6 million and $19.7 million, respectively, for the three months ended September 30, 2021 and $5.8 million and $6.9 million, respectively, for the three months ended September 30, 2020. Handysize vessel operating costs and supramax/ultramax vessel operating costs were $7.9 million and $4.0 million, respectively, for the three months ended September 30, 2021, and $7.7 million and $4.0 million, respectively, for the three months ended September 30, 2020. Handysize vessel operating costs per day were $5,707 per day for the three months ended September 30, 2021 and $5,168 per day for the three months ended September 30, 2020. Supramax/ultramax vessel operating costs per day were $5,306 per day for the three months ended September 30, 2021 and $5,438 per day for the three months ended September 30, 2020. Vessel operating costs per day were higher in the handysize drybulk carrier segment for the third quarter of 2021 in comparison to the third quarter of 2020 due to increased crew repatriation costs partly as a result of COVID-19 travel restrictions, quarantine requirements and related costs. Vessel operating costs per day were lower in the supramax/ultramax carrier segment for the third quarter of 2021 in comparison to the third quarter of 2020 due to higher repair costs in the third quarter of 2020 on a small number of vessels arising from the change in fuel which were partially offset by increased crew repatriation costs in the third quarter of 2021 as a result of COVID-19 travel restrictions.

The long-term charter-in costs per day for our supramax/ultramax fleet was $12,858 per day during the three months ended September 30, 2021. During this period, out of 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.

We divested from the medium range and small tanker segments to focus on the drybulk segments, though we retain one medium range tanker on bareboat charter included in our other tanker segment and as a result did not incur cost of sales for three months ended September 30, 2021. Our medium range tankers and small tankers cost of sales for the three months ended September 30, 2020 were and $1.5 million and $1.1 million, respectively.

Medium range tankers and small tankers voyage expenses were $0 million and $0.4 million, respectively, for the three months ended September 30, 2020. Medium range tankers and small tankers vessel operating costs were $1.1 million and $0.6 million, respectively, for the three months ended September 30, 2020. Medium range tankers and small tankers vessel operating costs per day were $6,022 per day and $6,054 per day, respectively, for the three months ended September 30, 2020.

Gross profit was $62.0 million for the three months ended September 30, 2021 and $1.6 million for the three months ended September 30, 2020.

Other operating income (expense) was operating income of $0.4 million for the three months ended September 30, 2021 and operating expense of $6.3 million for the three months ended September 30, 2020. Other operating expense in the third quarter of 2020 related to impairments on ships recognized in this period in 2020 and no impairments on ships were recognized in the comparative period of 2021.

Administrative expense was $10.9 million for the three months ended September 30, 2021 and $6.0 million for the three months ended September 30, 2020. Administrative expense increased in the third quarter of 2021 as compared to the third quarter of 2020 due to increased staff costs.

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

Interest expense was $2.4 million for the three months ended September 30, 2021 and $3.9 million for the three months ended September 30, 2020. Interest expense decreased in the third quarter of 2021 as compared to the third quarter of 2020 due to a decrease in LIBOR and the repayment of the mezzanine loan that was priced at a relatively higher interest rate.

Income tax benefit was $0.0 million for the three months ended September 30, 2021 and was $0.1 million for the three months ended September 30, 2020.

Profit for the three months ended September 30, 2021 was $49.1 million compared to a loss of $14.7 million for the three months ended September 30, 2020. Profit attributable to owners of the Company for the three months ended September 30, 2021 was $44.0 million compared to a loss of $14.3 million for the three months ended September 30, 2020.

Results for the Nine Months Ended September 30, 2021 and 2020

Revenue was $366.4 million for the nine months ended September 30, 2021 and $221.1 million for the nine months ended September 30, 2020. Vessel revenue was $316.0 million for the nine months ended September 30, 2021 and $176.3 million for the nine months ended September 30, 2020. The results for the first nine months of 2021 were positively impacted by higher TCE per day rates achieved in our handysize and supramax/ultramax drybulk business, reflecting the stronger spot markets in these segments, and relatively lower TCE per day rates achieved in our medium range tanker and small tanker segments for the first two quarters of the year, reflecting the weaker spot market in this segment. Ship sale revenue was marginally higher for the nine months of 2021 compared to the nine months of 2020.

In the drybulk business, handysize total revenue and supramax/ultramax total revenue was $107.6 million and $201.7 million, respectively, for the nine months ended September 30, 2021, and $60.8 million and $90.0 million, respectively, for the nine months ended September 30, 2020. Handysize vessel revenue and supramax/ultramax vessel revenue was $107.2 million and $201.7 million, respectively, for the nine months ended September 30, 2021, and $55.1 million and $89.8 million, respectively, for the nine months ended September 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 nine months ended September 30, 2021, and $51.1 million and $14.6 million, respectively, for the nine months ended September 30, 2020. Medium range tankers and small tankers vessel revenues were $1.8 million and $1.3 million, respectively, for the nine months ended September 30, 2021 and $22.3 million and $5.5 million, respectively for the nine months ended September 30, 2020.

Handysize TCE per day was $18,847 per day for the nine months ended September 30, 2021 and $6,079 per day for the nine months ended September 30, 2020. Supramax/ultramax TCE per day was to $21,514 per day for the nine months ended September 30, 2021 and $9,717 per day for the nine months ended September 30, 2020.

Medium range tankers TCE per day was $8,268 per day for the nine months ended September 30, 2021 and $17,857 per day for the nine months ended September 30, 2020. Small tankers TCE per day was $8,648 per day for the nine months ended September 30, 2021 and $13,118 per day for the nine months ended September 30, 2020.

Cost of sales was $256.2 million for the nine months ended September 30, 2021 and $210.6 million for the nine months ended September 30, 2020. Cost of sales increased due to the higher short-term charter hire costs as drybulk spot charter rates increased in the first nine months of 2021 as well as increased cost of ship sales as two medium range tankers and a small tanker were sold in 2021 compared to the sale of two older medium range tankers, one small tanker and an older handysize bulker with lower cost prices in 2020.

In the drybulk business, our handysize segment and supramax/ultramax segment cost of sales was $63.0 million and $141.0 million, respectively, for the nine months ended September 30, 2021 and $67.4 million and $89.1 million, respectively, for the nine months ended September 30, 2020.

Handysize voyage expenses and supramax/ultramax voyage expenses were $20.7 million and $48.4 million, respectively, for the nine months ended September 30, 2021 and $24.5 million and $37.9 million, respectively, for the nine months ended September 30, 2020. Handysize vessel operating costs and supramax/ultramax vessel operating costs were $23.1 million and $11.5 million, respectively, for the nine months ended September 30, 2021, and $21.0 million and $9.7 million, respectively, for the nine months ended September 30, 2020. Handysize vessel operating costs per day were $5,638 per day for the nine months ended September 30, 2021 and $4,935 per day for the nine months ended September 30, 2020. Supramax/ultramax vessel operating costs per day were $5,244 per day for the nine months ended September 30, 2021 and $4,955 per day for the nine months ended September 30, 2020. Vessel operating costs per day were higher in the handysize and supramax/ultramax drybulk carrier segments for the first nine months of 2021 in comparison to the first nine months of 2020 due to increased crew repatriation costs partly as a result of COVID-19 travel restrictions, quarantine requirements and related costs.

The long-term charter-in costs per day for our supramax/ultramax fleet was $12,690 per day during the first nine months of 2021. During this period, out of 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.

In the tankers business, medium range tankers and small tankers cost of sales were $44.8 million and $8.3 million, respectively, for the nine months ended September 30, 2021 and $42.5 million and $13.0 million, respectively, for the nine months ended September 30, 2020.

Medium range tankers voyage expenses and small tankers voyage expenses were $0.0 million and $0.4 million, respectively, for the nine months ended September 30, 2021 and $0.0 million and $1.3 million, respectively, for the nine months ended September 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 nine months ended September 30, 2021 and $5.8 million and $2.1 million, respectively, for the nine months ended September 30, 2020. Medium range tankers vessel operating costs per day were $6,634 per day for the nine months ended September 30, 2021 and $6,530 per day for the nine months ended September 30, 2020. Small tankers vessel operating costs per day were $5,895 per day for the nine months ended September 30, 2021 and $6,288 per day for the nine months ended September 30, 2020.

Gross profit was $110.2 million for the nine months ended September 30, 2021 and $10.5 million for the nine months ended September 30, 2020.

Other operating income (expense) was an income of $0.8 million for the nine months ended September 30, 2021 and an expense of $4.1 million for the nine months ended September 30, 2020. Other operating income increased in the first nine months of 2021 as compared to the first nine months of 2020. The reversals of impairments on ships and on right-of-use assets were partly offset by higher impairments on goodwill and intangibles, financial assets and the disposal group for the nine months ended September 30, 2021, compared to impairment losses on ships that were partially offset by exchange rate gains in the nine months ended September 30, 2020.

Administrative expense was $26.6 million for the nine months ended September 30, 2021 and $18.2 million for the nine months ended September 30, 2020. Administrative expense increased in the first nine months of 2021 as compared to the first nine months of 2020 due to increased staff costs.

Share of losses of joint ventures was $0.0 million for the nine months ended September 30, 2021 and a loss of 2.6 million for the nine months ended September 30, 2020.

Interest income was $0.2 million for the nine months ended September 30, 2021 and $0.5 million for the nine months ended September 30, 2020.

Interest expense was $10.2 million for the nine months ended September 30, 2021 and $12.5 million for the nine months ended September 30, 2020. Interest expense decreased in the first nine months of 2021 as compared to the first nine months of 2020 due to a decrease in LIBOR and the repayment of the mezzanine loan that was priced at a relatively higher interest rate.

Income tax benefit (expense) was a benefit of $2.4 million for the nine months ended September 30, 2021 and an expense of $0.5 million for the nine months ended September 30, 2020. The income tax benefit increased in the first nine months of 2021 as compared to the first nine months of 2020 due to the reversal of a provision for a tax-related legal case which was decided in our favor.

Profit for the nine months ended September 30, 2021 was $76.7 million and a loss of $27.0 million for the nine months ended September 30, 2020. Profit attributable to owners of the Company for the nine months ended September 30, 2021 was $66.1 million and a loss of $24.8 million for the nine months ended September 30, 2020.

Net cash flows generated from operating activities was an inflow of $136.6 million for the nine months ended September 30, 2021 and $56.6 million for the nine months ended September 30, 2020. Net cash used in investing activities was an outflow of $46.3 million for the nine months ended September 30, 2021 and $25.5 million for the nine months ended September 30, 2020. Net cash flows used in financing activities was an outflow of $51.8 million for the nine months ended September 30, 2021 and $28.7 million for the nine months ended September 30, 2020.

As of September 30, 2021, we had cash and equivalents of $76.1 million and restricted cash of $9.0 million.

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