Grindrod Shipping, a global provider of maritime transportation services predominantly in the drybulk sector, announced its earnings results for the three months ended March 31, 2021, the three months ended June 30, 2021 and the six months ended June 30, 2021.
Financial Highlights for the First Quarter of 2021 Ended March 31, 2021(1)
- Revenues of $71.8 million
- Gross profit of $13.8 million
- Profit for the period of $3.3 million
- Profit for the period attributable to owners of the Company of $2.4 million, or $0.12 per ordinary share
- Adjusted EBITDA of $21.8 million(2)
- Handysize and supramax/ultramax TCE per day of $12,053 and $13,259, respectively(2)
(1) In view of commencing with earnings reporting on a quarterly basis, we have included the financial highlights for the First Quarter ended March 31, 2021 in this press release to provide additional detail on our First Half results.
Financial Highlights for the Second Quarter of 2021 Ended June 30, 2021
- Revenues of $159.4 million
- Gross profit of $34.3 million
- Profit for the period of $24.2 million
- Profit for the period attributable to owners of the Company of $19.8 million, or $1.02 per ordinary share
- Adjusted EBITDA of $40.7 million(2)
- Handysize and supramax/ultramax TCE per day of $18,104 and $21,916, respectively(2)
Financial Highlights for the First Half of 2021, Ended June 30, 2021
- Revenues of $231.2 million
- Gross profit of $48.2 million
- Profit for the period of $27.6 million
- Profit for the period attributable to owners of the Company of $22.1 million or $1.15 per ordinary share
- Adjusted EBITDA of $62.5 million(2)
- Handysize and supramax/ultramax TCE per day of $15,285 and $17,606, respectively(2)
- Period end cash and cash equivalents of $58.1 million and restricted cash of $9.3 million
(2) Adjusted EBITDA and TCE per day are non-GAAP financial measures. For the definitions of these non-GAAP financial measures and the reconciliation of these measures to the most directly comparable financial measure calculated and presented in accordance with GAAP, please refer to the definitions and reconciliations in “Non-GAAP Financial Measures” at the end of this press release.
Operational Highlights for the First Quarter, Second Quarter and First Half of 2021
- We sold the 2009-built small products tanker Breede for a gross price of $6.8 million with delivery to the buyers on April 14, 2021.
- We sold the 2013-built medium range tankers Leopard Moon and Leopard Sun for a total gross price of $42.8 million with deliveries to the buyers on April 12, 2021 and April 20, 2021.
- On May 07, 2021, the United Kingdom Upper Tribunal found in our favor with respect to a previously disclosed tax dispute with Her Majesty’s Revenue and Customs (“HMRC”). HMRC decided not to appeal the decision which prompted the release of $2.4 million in tax provisions that had been recorded in respect of such dispute in prior periods.
- On May 19, 2021 the Company repaid the approximately $25.8 million remaining outstanding amount on the senior secured credit facility with an affiliate of Bain Capital Credit (“Bain”).
- On June 28, 2021 the Company announced its transition to quarterly financial reporting from semi-annual reporting.
- During the second quarter, we repurchased a combined total of 33,467 ordinary shares in the open market on NASDAQ and the JSE at an average price of $8.46 per share.
Implementation of New Dividend and Capital Return Policy
Commencing from the quarter ending September 30, 2021, the Company intends, subject to operating needs and other circumstances, to return approximately 30% of its adjusted net income (adjusted for extraordinary items) to shareholders through a combination of quarterly dividends and/or share repurchases. The Company intends to pay a minimum quarterly base dividend of $0.03 per share and an additional variable component, that will consist of additional dividends and/or share repurchases. We expect that the return to shareholders will be primarily in the form of dividends, though the Company retains the right to adjust the allocation to maximize value to shareholders based on market conditions, share price levels, share liquidity, and other related matters.
The timing and amount of dividend payments will be determined by our board of directors and could be affected by various factors, including our financial results and earnings, restrictions in our debt agreements, required capital expenditures, and the provisions of Singapore law affecting the payment of dividends to shareholders and other factors. Our board of directors may review and amend our dividend policy from time to time and we may stop paying dividends at any time and cannot assure you that we will pay any dividends, including any minimum quarterly base dividend amount, in the future or of the amount of any such dividends. For the avoidance of doubt, the payment of any dividends is not guaranteed, and the payment of dividend is subject at all times to the requirements and restrictions set out in the Company’s Constitution and Singapore Companies Act (Cap. 50).
- On July 21, 2021, the Group entered into an agreement to acquire the remaining shares in IVS Bulk held by Bain for a total purchase consideration of $46.3 million, comprising of $37.2 million for the ordinary equity shares and $9.1 million for the preference shares. The purchase price is based on appraised values as of May 13, 2021 and the IVS Bulk balance sheet as of April 30, 2021. The agreement with Bain is subject to customary closing conditions with closing to occur no later than September 30, 2021.
- On August 17, 2021, Grindrod Shipping entered into an agreement to purchase the 2019 Japanese-built ultramax bulk carrier the IVS Phoenix, which we currently charter-in from its owners for a price of US$23.5 million, which we believe reflects a significantly reduced price relative to management’s estimate of the fair market value of the vessel due to the early termination of the prevailing charter agreement. The vessel was originally chartered-in for a minimum period of three years from delivery with two one-year extension options and no purchase options. In order to finance the acquisition, we have simultaneously entered into a financing arrangement with a separate Japanese owner on attractive terms for a gross amount of $25.0 million. As part of the financing arrangement, the Group will bareboat charter the vessel back for a period of up to 15 years and has the right, but not the obligation, to acquire the vessel after the first two years of the charter. The financing would be on similar terms to those completed for IVS Knot, IVS Kinglet and IVS Magpie during 2019 and Matuku in 2020. The transactions are expected to close by the end of September 2021 while the vessel will remain chartered-in on the original terms until closing.
- As of August 16, 2021, we have contracted the following TCE per day for the third quarter of 2021 (1)(2):
- Handysize: approximately 1,326 operating days at an average TCE per day of approximately $25,205
- Supramax/ultramax: approximately 1,686 operating days at an average TCE per day of approximately $30,666
(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.
Martyn Wade, the Chief Executive Officer of Grindrod Shipping, commented:
“Grindrod Shipping took full advantage of the improving market conditions in the drybulk sector during the first and the second quarters of 2021 to deliver strong results. In addition, we were able to reduce our debt by approximately $66.9 million while concurrently increasing our total cash and cash equivalents by approximately $20.1 million through strong free cash flow from our drybulk business and the timely sales of nearly all of our remaining product tankers. Our healthy balance sheet and strong industry fundamentals now position us well as we seek to both reward our shareholders and demonstrate the benefits of the differentiated commercial strategy of Grindrod Shipping.
To that end, we are pleased to announce the initiation of a quarterly dividend and capital return policy which coincides with our transition to quarterly financial reporting. Commencing with the third quarter, the Company intends to return approximately 30% of its adjusted net income to shareholders through a combination of quarterly dividends and/or share repurchases. The Company intends, subject to operating needs and other circumstances, to pay a minimum quarterly base dividend of $0.03 per share and an additional variable component, that will consist of additional dividends and/or share repurchases. This variable policy aims to create a sustainable dividend throughout the market cycles while enabling our shareholders to share in the market strength.
On the commercial side, the dynamic approach of the Company that includes opportunistically chartering in vessels on both long- and short-term time charters in order to service our cargo contracts is bearing significant fruit. Our long-term charter-in vessels are contracted at what we believe to be well below current charter market rates and most contain favorable extension options and/or fixed price purchase options that are now notably below the current market value. This allows us the option to pursue growth at prices considerably below prevailing levels in the secondhand and charter markets. In addition, we have been able to complement our core fleet with a number of short-term charter-in vessels on which we hold a series of charter extension options at commercially favorable levels. Together with our owned fleet of predominantly Japanese-built vessels, all of these options demonstrate the flexibility of our operating model.
Finally, as we work to close the recently announced agreement to acquire the remainder of our IVS Bulk subsidiary, expected to occur in the coming month, we look forward to achieving the final key step in our corporate transformation since listing. Upon closing, we will have completed the acquisition or sale of all JV vessels originally held and sold all our spot trading product tankers, all while positioning the Company to take full advantage of the current strong drybulk market.”