Grindrod Shipping Holdings Ltd. 2018 Second Half and Full Year Financial Results

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Grindrod Shipping Holdings Ltd. 2018 Second Half and Full Year Financial Results
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SINGAPORE, Feb. 27, 2019 (GLOBE NEWSWIRE) -- Grindrod Shipping Holdings Ltd. (GRIN) (GSH) (“Grindrod Shipping” or "Company" or “we” or “us”), a global provider of maritime transportation services in the drybulk and product tanker sectors, today announced its second half and full year 2018 earnings results for the period ended December 31, 2018.

Financial Highlights for the second half of the year ended December 31, 2018(1)

  • Revenues of $168.2 million.
  • Gross profit of $8.7 million.
  • Adjusted EBITDA of $1.6 million(2).
  • Loss for the period of ($7.2 million) or ($0.38) per ordinary share.
  • Handysize and supramax/ultramax TCE per day of $9,066 and $12,795, respectively, outperformed the Baltic Handysize TC Index (“BHSI”) and Baltic Supramax-58 TC Index (“BSI-58”) benchmarks by approximately 8.8% and 13.6% respectively(2).
  • Handysize and supramax/ultramax fleet utilization of 99.5% and 99.7% respectively.
  • Medium Range (“MR”) product tanker TCE per day of $10,950 outperformed Clarksons’ Average MR Clean Earnings per day assessment of $8,573 by approximately 27.7%, and small tanker TCE per day of $11,453(2).
  • MR product tanker and small tanker fleet utilization of 98.1% and 99.8%, respectively.
  • Period end cash and cash equivalents of $47.3 million.

Financial Highlights for the full year ended December 31, 2018(1)

  • Revenues of $319.0 million.
  • Gross profit of $11.1 million.
  • Adjusted EBITDA of ($0.1 million)(2).
  • Loss for the period of ($20.6 million) or ($1.08) per ordinary share.
  • Handysize and supramax/ultramax TCE per day of $9,032 and $11,878 outperformed the BHSI and BSI-58 TC benchmarks by approximately 9.3% and 8.8%(2), respectively.
  • Handysize and supramax/ultramax fleet utilization of 98.9% and 99.5% respectively.
  • MR product tanker TCE per day of $11,258 outperformed Clarksons’ Average MR Clean Earnings per day assessment of $8,750 by approximately 28.7%, and small tanker TCE per day of $11,392(2).
  • MR product tanker and small tanker fleet utilization of 97.8% and 99.1%, respectively.

(1) The proportionate share of our joint ventures is not reflected in our condensed consolidated and combined statement of profit and loss, but is reflected in our segment results.
(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 measure to the most directly comparable financial measure calculated and presented in accordance with GAAP, please refer to the definitions and reconciliations at the end of this press release.

Operational Highlights for the second half of the year ended December 31, 2018

  • We entered into agreements to charter-in three Japanese newbuilding ultramax “eco” drybulk vessels upon delivery. IVS Phoenix is expected to be delivered in Q2 2019 and chartered-in for a minimum of three years with extension options. IVS Pebble Beach and IVS Atsugi are expected to be delivered in Q3 2020 and chartered-in for a minimum of two years with extension options and include purchase options in favor of the Company.
  • We sold IVS Kanda, a non-“eco” handysize drybulk vessel, aged 14 years, in line with our strategy to maintain a young fleet, for gross proceeds of $8.7 million.
  • In August 2018, upon the completion of a 10 year charter, we redelivered the handysize drybulk vessel IVS Shikra.
  • We sold Berg, a 10 year old Chinese-built small tanker that we owned in a joint venture with Engen Petroleum to a third party, for gross proceeds of $7.6 million.
  • We redelivered Coral Stars, a 14 year old chartered-in medium range tanker on expiry of the charter in December 2018.

Latest Developments

  • We extended the termination date of the IVS Bulk joint venture from December 31, 2018 to April 30, 2019, and are continuing to discuss alternatives to termination with our joint venture partners.
  • We have commenced the wind up of the Leopard Tankers joint venture with Vitol, our joint venture partner, whereby we acquired and Vitol acquired or will acquire two medium range “eco” tankers from the joint venture. Accordingly we acquired Leopard Moon and Leopard Sun for a total purchase price of $54.0 million. Proceeds from the sale by Leopard Tankers of its vessels have been or will be applied to fully repay the joint venture’s $138.5 million credit facility, of which $70.2 million remained outstanding as of December 31, 2018, and our guaranty thereunder will be released upon full repayment. The financial results of Leopard Moon and Leopard Sun will be consolidated into our financial statements following delivery of these vessels to us.
  • In January and February 2019, we drew down $14.9 million on each vessel, on a new $29.9 million credit facility with NIBC Bank N.V. bearing interest at LIBOR plus a margin of 3.20% per annum to finance in part the acquisition of the two vessels from Leopard Tankers. 
  • In February 2019, we agreed to sell to a third party the one remaining vessel in our joint venture with Engen, the nine year old, non-“eco” medium range tanker Lavela at a gross price of $14.8 million, with delivery to the new owners expected to occur in March 2019. The joint venture will be terminated following the delivery of Lavela.

CEO Commentary

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

“Our results in the second half of 2018 showed a marked improvement reflecting the stronger dry bulk markets but also our continued ability to outperform the relevant industry benchmarks in our dry bulk fleet. Specifically, for the second half of 2018, our TCE per day in the handysize segment was $9,066 compared to the BHSI of $8,329 (adjusted for 5.0% commissions), an outperformance of approximately 8.8%, whereas in the ultramax/supramax segment our TCE per day was $12,795 compared to the BSI-58 of $11,267 (adjusted for 5.0% commissions), an outperformance of approximately 13.6%. We should note that in the first half of 2018 we had outperformed the BHSI and BSI-58, by approximately 9.7% and 5.1% respectively. On the tanker side, the markets remained weak for most of the second half of 2018 with a resurgence as of November 2018 which carried into 2019 but has recently declined from the highs in late 2018. Still, we achieved an MR tanker TCE per day of $10,950 during the second half of 2018 compared to $8,573 for the Clarksons MR Clean Average Earnings assessment, an outperformance of approximately 27.7%.

“The dry bulk market in 2019 to date shows signs of weakness reflecting trade wars, the Chinese New Year’s seasonal impact, a slowdown in Chinese imports and other external market disruptions.  Yet we believe that the long term fundamentals appear positive reflecting the reduced supply outlook combined with steady demand especially for minor bulks, which are typically carried by Grindrod Shipping’s vessels. We also expect the product tanker market to improve given the increase in refining capacity and dislocation between refiners and end users combined with the low orderbook for MR tankers. Furthermore, the implementation of the IMO 2020 regulations may have a positive impact on the overall market further limiting supply as the result of higher scrapping rates, increased off hires and slow steaming.

“In this environment, we expect to continue to leverage our competitive advantages which include the modernity and high quality of our Japanese built fleet, our ability to maximize revenue through the use of in-house commercial pools and cargoes, and our close commercial relationships with global and regional industry players. We believe that the current market weakness may present attractive growth opportunities and we believe that Grindrod Shipping is well positioned to take advantage of these opportunities. Our company continues to operate a diversified fleet of dry bulk and product tanker vessels which affords management the opportunity to pursue potential consolidation and growth opportunities in both sectors.”

Results for the Six Months Ended December 31, 2018 and 2017

In comparison to the results for the second half of 2017, the results for the second half of 2018 were impacted by the sale of two non-core businesses on January 1, 2018. In the drybulk business, our handysize and supramax/ultramax operating days declined to 6,279 days for the six months ended December 31, 2018 from 7,676 days for the six months ended December 31, 2017, primarily as a result of a reduction of short-term chartered-in days. A significant portion of both our drybulk and tankers fleet continued to be exposed to the spot markets in the second half of 2018. Handysize and supramax/ultramax drybulk spot markets were generally stronger in the second half of 2018 than they were in the second half of 2017. On the other hand, while there was an improvement in the MR tanker market from November 2018, the second half of 2018 in this sector was generally weaker than the second half of 2017.

Story continues

Revenues were $168.2 million for the six months ended December 31, 2018 and $215.5 million for the six months ended December 31, 2017.  Vessel revenues were $156.4 million for the six months ended December 31, 2018 and $194.4 million for the six months ended December 31, 2017.

In the drybulk business, handysize total revenues and supramax/ultramax total revenues were $72.9 million and $73.6 million, respectively, for the six months ended December 31, 2018 and $72.3 million and $78.7, respectively, for the six months ended December 31, 2017.  Handysize vessel revenues and supramax/ultramax vessel revenues were $63.4 million and $73.0 million, respectively, for the six months ended December 31, 2018 and $64.5 million, and $78.2 million, respectively, for the six months ended December 31, 2017. 

In the tankers business, our medium range tankers and small tankers total revenues were $19.0 million and $12.2 million, respectively, for the six months ended December 31, 2018 and $29.7 million and $10.9 million, respectively, for the six months ended December 31, 2017.  Medium range tankers and small tankers vessel revenues were $19.0 million and $8.4 million, respectively, for the six months ended December 31, 2018 and $18.8 million and $10.9 million, respectively for the six months ended December 31, 2017. 

Handysize TCE per day was $9,066 per day for the six months ended December 31, 2018 and $8,422 per day for the six months ended December 31, 2017. Supramax/ultramax TCE per day was $12,795 per day for the six months ended December 31, 2018 and $10,639 per day for the six months ended December 31, 2017.

Medium range tankers TCE per day was $10,950 per day for the six months ended December 31, 2018 and $10,592 per day for the six months ended December 31, 2017. Small tankers TCE per day was $11,453 per day for the six months ended December 31, 2018 and $13,458 per day for the six months ended December 31, 2017.

Cost of sales was $159.5 million for the six months ended December 31, 2018 and $203.1 million for the six months ended December 31, 2017. In the drybulk business, handysize segment and supramax/ultramax segment cost of sales was $67.0 million and $71.9 million, respectively, for the six months ended December 31, 2018 and $68.3 million and $79.2 million, respectively, for the six months ended December 31, 2017.

Handysize voyage expenses and supramax/ultramax voyage expenses were $32.9 million and $35.7 million, respectively, for the six months ended December 31, 2018 and $31.8 million, and $37.9 million, respectively, for the six months ended December 31, 2017. Handysize vessel operating costs and supramax/ultramax vessel operating costs were $13.5 million and $1.7 million for the six months ended December 31, 2018, respectively, and $13.5 million and $1.7 million, respectively for the six months ended December 31, 2017. Handysize vessel operating costs per day were $5,167 per day for the six months ended December 31, 2018 and $5,124 per day for the six months ended December 31, 2017. Supramax/ultramax vessel operating costs per day were $4,667 per day for the six months ended December 31, 2018 and $4,592 per day for the six months ended December 31, 2017.

The average daily charter-in costs for our long-term supramax/ultramax fleet was $12,668 per day during the second six months of 2018. During this period, out of 2,913 operating days in the supramax/ultramax segment, 50.3% were fulfilled with owned/long-term chartered-in vessels and the remaining 49.7% with short-term chartered-in vessels. As noted above, the IVS Shikra was redelivered in August 2018 (which was our only long-term chartered-in Handysize vessel).

In the tankers business, medium range tankers and small tankers cost of sales were $20.1 million and $10.3 million, respectively, for the six months ended December 31, 2018 and $33.0 million and $8.1 million, respectively, for the six months ended December 31, 2017.  Medium range tankers voyage expenses and small tankers voyage expenses were $4.2 million and $1.3 million, respectively, for the six months ended December 31, 2018 and $3.4 million and $2.2 million, respectively, for the six months ended December 31, 2017. Medium range tankers vessel operating costs and small tankers vessel operating costs were $5.4 million and $4.1 million, respectively, for the six months ended December 31, 2018 and $6.4 million and $4.7 million, respectively, for the six months ended December 31, 2017. Medium range tankers vessel operating costs per day were $6,502 per day for the six months ended December 31, 2018 and $6,806 per day for the six months ended December 31, 2017.  Small tankers vessel operating costs per day were $6,390 per day for the six months ended December 31, 2018 and $7,286 per day for the six months ended December 31, 2017.

The average daily charter-in costs for our long-term medium range tanker fleet was $14,972 per day during the second six months of 2018 and during this period all of the operating days in the medium range segment, were fulfilled with owned/long-term chartered-in vessels. The Company did not have any long-term or short-term chartered-in small tanker vessels during this period.

Gross profit was $8.7 million for the six months ended December 31, 2018 and $12.4 million for the six months ended December 31, 2017.

Other operating income was $3.4 million for the six months ended December 31, 2018 and $2.8 million for the six months ended December 31, 2017 primarily due to the increase in foreign exchange gains for the six months ended December 31, 2018.

Administrative expenses were $14.3 million for the six months ended December 31, 2018 and $19.3 million for the six months ended December 31, 2017. The higher level of administrative expenses in the period ended December 31, 2017 was primarily due to $2.4 million of costs in the six months ended December 31, 2017 relating to our spin-off from Grindrod Limited, as well as other administrative costs relating to the two non-core businesses sold on January 1, 2018.