Half Year 2020 Grindrod Shipping Holdings Ltd Earnings Call
Thank you for standing by ladies and gentlemen, welcome to the Green broad shipping conference call on the first half Twentytwenty financial results we have.
Well actually wait Chief Executive Officer, Mr., Stephen Griffin Chief.
Chief Financial Officer of the company at this time all participants on the listen only mode. There will be a presentation funded by a question answer session at which time if you wish to ask the question. Please press star one on your telephone keypad I'm Wakefield named being nights I must advise should not discomfort she's been recorded today.
I was when I pass the floor, which you'll first speaker today.
Wait. Please go ahead Sir.
Thank you operator.
Good day, everyone. Thanks for joining a cool for the first off 2020 ended June <unk>.
Let me refer you to slide number two with the forward looking statements disclaimer.
And this coal we will make certain forward looking statements, including statements regarding future financial and operating performance. These statements include information regarding future time charter contracts outlooks for the dry.
And tanker markets, although operating issues.
These statements are based on the beliefs and expectations should management as of today.
Actual results may differ materially from expectations investors should recast see the risks and uncertainties described in the slide presentations in today's press release is what is the risk factors included in <unk> annual report on the other filings with the FCC.
We assume no obligation to revise or update forward looking statements, but that was the result of new information future events, otherwise, except as required by law.
In addition, during the school.
I'll be discussing some non-GAAP financial measures.
Additional disclosures relating to these non-GAAP financial measures, including reconciliations to the most directly comparable GAAP measures. So you see yesterday's press release on pages 28, 29, well just like that which is posted on our website <unk> filings with the FCC.
Please turn to slide for the first off 2020 financial highlights.
Actual results for the first off the 2020 stronger than the first off for 2019.
The majority of income metrics.
Revenue in the first off in 2020 was flat year over year gross profit increased $8.9 million, an adjusted EBITDA nearly doubled 20 to 28.8 million compared to 14.7 billion. The first off for 2019.
This led to a reduction in net loss and loss per share.
$10.5 billion.55, respectively. The first off for 2020 compared to the first off for 2019.
The results for the first talking to the consolidation of the results of Ivy I spoke.
Two separate the 14th 2020 as a result acquisition regiments, 33.25% interest in I'd be I spoke increasing our ownership to 66.75% along with control to be entity.
The effects of the code at 19 pandemic felt in both positive and negative ways during the period.
The product tanker market temporally enjoyed your short strong earnings as a result to changes in refined product flows into multiple floating storage worldwide.
Let's say the dry bulk market weakened significantly during the first off the yet due to global knockdowns itself into raw materials.
Particularly in China.
Historically weak dry bulk spot charter rates, partially offset by strong transferring outperformance underpinned by our call got a contraction to freight history during the period.
Handysize supramax stroke, ultramax vessels outperformed their respective Baltic indices by 2000 than $67 a day $3444 a day, respectively. During the first off for 2020.
Net loss in the first off this negatively impacted by 4.2 million dollar loss investors styles and disposal assets.
Let's please turn to slide five to look at our fleet developments in the first off of the yes.
In February 2020, we concluded the acquisition in additional stake of 33.25% ordinary and preferred equity shares Rvs bulk helped by regiments for total consideration of $44.1 million.
By increasing our stake to 66.75 cent as I mentioned, we took control of the entity and consolidated into our results following the acquisition.
Acquisition was funded through a combination of cash on hand on a serious a refund actions as detailed in the slides and press releases.
It does seem to get sorted <unk> into our results creates what about major objectives. Since we went public in June 2018.
Simplify the couldn't real story with investors by reducing the number of unconsolidated joint ventures.
Yes boat acquisition represents material growth for a company since 12 mountain Japanese built eco vessels.
Fully consolidated into our financial statements.
In terms of fleet developments on the drug felt so should we read live at the IPO. So got stuck a long term charter then Supramax felt Korea. The conclusion about shelter in February 2000 2020.
Also we agreed to amend the charter party relate to the Supramax spoke carry rvs pine harvest.
And at the end of a charter to extend the chartering for a period about five to seven bumps commencing in May 2020, I'd be retiring the option to purchase this vessel, but not known kind of options to extend the period of the charts.
The product tanker sorry, we took advantage of the strong bucket to divest worry about product tankers reinforcing our liquidity.
That's indicates it over slides we saw the 2000 it tends to slow product tanker Kelly and to meet your range tankers to 2008 built and you all though its 2010 felt right now.
Total gross price of $38.6 million for the three vessels.
We also read live the door fine is a long term shots of the medium product tanker at the conclusion about shots in June 2020.
Now please turn to slide six to discuss highlights of the company's recent developments.
Continuing on the topic of fleet developments of the dry bulk side, we can try to sell the 2000, a full built handysize bulk carrier I V S not Joel to unaffiliated third parties.
Most price of $5.1 billion with delivery to the buzz scheduled this.
Quota.
And the product tanker side, we read live at the door freeze a long time chartered in meeting right for that tanker.
Solution of her charts in July 2020.
As of today I try both <unk> include 17, Handysize drybulk carriers, including obvious nacelle unforeseen supramax stroke, ultramax dry bulk carriers on the water. The two charts. It in ultra met striped carriers under construction in Japan due to be delivered between this quarter 2020 and Q.
In 2021.
Take a fleet includes three meter range tankers, the one small tanker.
Details on athletes are in the appendix for this presentation.
We're also pleased that we achieved a top 10 and first quartile ranking in the 2020 E.S.J. school caused by weather was a.
Now turning to slide seven.
This slide showcases our chartering performance over time demonstrates our continued ability to outperform the rather than try fault freight rate bench wells both of our core segments. They had the size and Super micro coax remarks.
That's a commission we outperformed the books it got 20, Eighthpc index be exercised by 56% and the Baltic Supramax 58, T.C. Index PSR 58 by 60% to the first off.
It was possible thanks to our cargo contracts to freight hedging during the period.
Now I'll pass the floor over to Steve Griffiss, Chief Financial Officer, who will go over the financial highlights performances for the first off in 2020, Steve.
Thank you. Thank you Martin.
Now, let's turn to slide nine.
Revenue was flat year over year.
$67.1 million for the six month ended June that yet twentytwenty.
Gross profit increased $8.9 million for the six months ended June that they get twentytwenty.
From 5.9 billion for the same period in in 2019.
Administration expenses, we reduced <unk> to 12.2 million for the six months ended June it yet 2020 from 18.3 million for the same period the previous yet.
Interest expense was 8.6 million for the six months ended June that you twentytwenty.
And $5.8 million for the same period in 2019.
The increase for the six months ended June. The said you think you drink. He was primarily due to additional did facilities, including the new facility related to the acquisition of the additional interest in obvious park and the high interest rates on this facility, which was partially offset by a lower libeled rights.
Lots attributable loss attributable to I mean as of the company for the six months ended June that yet 2020 decreased $10.5 million from a 19 million loss for the same period in 2019.
Sure appreciate the impact of the freight market volatility on our call seat performance now that every 1000 dollar change TCV per day equated to a 6.2 million dollar.
We see even then you during the first off.
20 trains.
Now turning to slide 10.
With respect to the balance sheet financial statements of the first half of Twentytwenty include the acquisition of the additional stake in and consolidation of obvious fault.
Which caused a total assets to increase the $661 million <unk>.
The increase cash and leveraged reflects the consolidation of the obvious off balance sheet, along with the additional between paid to acquire control of the Institute.
As of June it yet we held combined cash bank balances and restricted cash of 65.4 million, while bank loans and other borrowings totaled $294.3 million.
On slide 11 I.
I didn't repayment price hollings, each scheduled amortization payments of 16.5, and $24.4 million, respectively, Twentytwenty and 22 anyone.
2021 maturities are comprised of the 35.8 million sanctity land and the bank line related to them, but you do that we entered into these findings riots you its maturity.
Let's turn to slide 12.
We will now briefly discuss results in the Drybulk and tanker business.
In the Drybulk business any thoughts easy per day was 5773.
<unk> for the six months ended June Thirtyth, Twentytwenty and $7050 per day for the same period in 2019.
We achieved a fleet utilization of 99.9 cents Mrs positive twentytwenty, while vishal operating cost per day declined $4808 today.
Supramax Ultramax Tc today was 9163.
Good day for the six months ended June that you Twentytwenty and $10481 today for the same period in 2000 Inaki.
We achieved a few fleet utilization of 97.4% in the fixed cost opportunities.
Missile operating cost per day increased slightly to $4666 today.
While the long term chartering costs. They declined slightly to 12000, then $10 per day.
Looking ahead, the average long term charter in cost today, the Supramax Ultramax sleep. The second Hobson's Twentytwenty is expected to be approximately $11950 per day.
As of August the 19th Twentytwenty, we have contracts the following <unk> per day.
Well handysize.
Humidity 1210 operating days at an average Tc $6280 today.
And so supramax ultramax approximately 1740 operating days at an average TCV of $10240 every day.
On slide 13 is a tanker segments operational performance.
In the tanker business.
Well media might shake it easy pay day was $19343 per day for the six months ended June Thirtyth Twentytwenty material increase from the 14270 $6000 per day for the same period in 2019.
We achieved that seat utilization of 99.8% in the first half of 23 inches.
Missile operating cost per day.
6660 volt today, while longtime chartering cuts for today with $16300 today.
But the Redelivery of the dark reads on July the NAXI currently has no long term charter in costs in the tanker segment.
Well small tankers.
He per day was 11368 per day for the six months ended June 5th yet Twentytwenty and 12000 in 15 per day for the same period in 2019.
We achieved that seat utilization of 95.8% in the face pop up between between.
There's a lot breaking cost with $6377 per day.
As of August the 19th Twentytwenty, we have contracted approximately 850 operating days at an average Tc today $12220 throughout tankers and that's excluding then that you could we have combined the guidance for I think the segment as we only had two m. AWS and once more tank trading.
But.
Now turning to slide 14. This slide shows the I'm sleep daily cash breakeven analysis for the first part of Twentytwenty.
Our dry bulk fleet.
Lead cash breakeven rights for the period.
It was $10160 to missile today.
Long term charter in breakeven with $18120 to this'll today, and cool job right, even was $10810 pivotal data.
I think I sleep cash breakeven rights for the period was $11750 to missile pay day.
Long term charted in breakeven with 16410, they this will pay day.
And cool tank at breakeven was $12890 individual today.
The cash breakeven rate per day increase operational expenses net DNA interest expense and debt prepayments.
With that I would like to attend the pullback of it tomorrow.
Thanks, Dave.
Please turn to slide 16.
But that slipped to the fundamental was about the dry bulk product tanker sector is and how they have been developing.
Well since projects dry bulk trade development grows to be a negative for the off to set for 2020.
If I don't think but it took positive 4.6% in 2021.
Oh these economic activity appears to have rebounded earlier than other countries supporting dry bulk trade activity. Since then but not enough to make up overall declines into loans.
We expect pent up demand will lead to a more robust recovery in 2021 in both world trade figures and even more so in dry bulk shipping ton mile demand.
Now, we can turn to slide 17.
That's the slide depicts.
Right, but call. It goes hit hardest why the global pandemic being called a minor Bulks Oh, no has been more resilient to to try and a stimulus measures. After they looked dials raised.
In addition, we knew Chinese imports are great and a strong South American August have supported resilient grain trade flows.
Now to slide 18.
As the chart on the left indicates that the maestro Supramax time charter rates steadily increase since the market letters of early life reflection of the return of economic activity as a calling them is reopening from lockdown.
Well the other half asset prices have declined marginally over the last year, reflecting the poor market conditions experienced in the first half of the.
Please turn to slide 19.
The Drybulk order book continues to shrink to multi decade lows is estimated at 27% to the fleet with deliveries next we expect to scrapping estimated at 27 million tons deadweight in 2020.
The fleet age profile, an order books Handysize Supramax vessels is even more promising those older books all the soldiers in the dry bulk fleet, a 3.9% and 5.3% respectively.
90% to the dry bulk trade is 15 years or older, but 10% to the freight 20 years or older.
Combined with the new environmental regulations, they should encourage increased scrapping.
Please turn to slide 20 to look at the product tanker demand.
Buses projects totaled them all to contract by 6.7% to 2020 foot up by rebound to 6.1% to 2021.
Despite the strong contractually seaborne product trade floating storage loves so strong that it kept some material portion of the feet employed on charter rates elevated.
As the floating storage try them once more the fleet has been really stuck into trading.
Sunken safend across <unk> spikes during that period due to the story strike.
Right So declined just straight unwinds.
Despite the spike in rights asset values declined over the period as Corona Vars made to logistical completion of sale and purchase transactions extremely difficult to execute even when they weren't willing buyers and sellers.
Turning to slide 22.
Well the Drybulk order book the product tanker order book estimated 7% of the fleet is a lost we've seen it over 20 years.
Me growth for the product tankers of over 10000 deadweight is estimated at 1.8% to 2000, 21.7% in 2021.
Finally, please turn to slide 24, fracs inclusion in strategy.
We continue to ask I taught out strategy one of the key objectives since our public listing in June 2018 was to simplify the Grand Lux shipping story for investors by reducing the number of unconsolidated joint ventures.
That ends we are reps out the let let the tankers and petrochemical shipping joint ventures, and obtain control of the Rvs bulk joint venture, leaving this only with one unconsolidated joint venture vessel.
The obvious folks acquisition represents material growth for the company, There's 12 Muslim Japanese built eco vessels are now fully consolidated into our financial results.
We are confident that our capital structure operations are easier for investors to track and understand.
Another key part of our structured is being our approach to complies with the IMO 2020 emission regulations.
Assumption been companies are chosen to fit the vessels with exhaust gas scrubber is we have elected not to do so instead of using compliant fuel.
We have concerns regarding the route environmental aspects of scrubbers.
Furthermore, the spread differential between high and low so it feels as right remains depressed desktop syndicating doubts as to the sufficiency of economic return on the scrub installation costs for the vessel categories, which we operate.
Turning to the market outlooks pandemic continues to pose significant challenges and uncertainties.
The dry cargo market appears to have bottomed in late April early may driven by strong Chinese stimulus measures in many world of call. It is emerging from lump towns.
Well thank has temporarily enjoyed higher charter rates during the first off the yet.
We were able to benefit both from a cash earnings perspective.
And our ability to sell take us into a strong freight market.
As we look forward the smallest newbuilding order book indicates supports eventual bucket recover recovery due to construction of vessel supply growth.
This environment, we will continue to focus on our core strengths and competitive advantage, including multiple fleets use of in house commercial pulls in call. It goes but I close relationship with high quality global and regional excuse me regional financial and trading players.
With this I think you all for joining our call today look forward to reporting further progress on grin on shipping and with that we'd like to open up for questions operator.
Thank you ladies and gentlemen.
And if you wish to ask a question. Please press star one on the telephone keypad and wait for your line to be open if you wish to cancer aircraft. Please press star and Q once again start and one if you wish to ask a question.
[noise] once again start and one to ask a question.
Your first question comes the line of Poe Fratt, some noble capital markets. Please ask your question.
Good morning, reminding me good morning, Steve.
I was wondering.
Really good progress on you know, obviously cleaning up the joint ventures and simplifying the overall strategy I appreciate that could you on the overall macro environment can you just highlight some of the reasons you think that minor bulk was hit hit so hard.
If you look at the Drybulk market that seems to be an outlier as far as just the GAAP separate the drop in 2000 2020 relative to other sectors.
Hi.
Thanks, Yes, it's an interesting question.
[music].
China, obviously Chinese coal imports for the first off that's come through very strong.
But apart from Vietnam coal imports, let's say in January worldwide, with but slow downs and thousands or the lack of electricity generated and this also fed into the mine about swear, particularly in China initially factories close but literally everything was on the on the locked down.
It hit some of that markets very hard and I don't see some of the mine about said quite high value. So what we have found is that countries would be working through stockpiles and this is now quite exciting whereby as countries reopen they have to go back into the market to restock and of course, there's an awful lot of industries that we're running just in time Oh.
Supply chain sort of course came on stock currently so I think we're sensing the People's business model is changing or that should be positive. So the mind about but generally it was the classic with <unk> with no industrial production ritually subconscious fuss with remotes factories et cetera, there was very little demands for the minor Bulks <unk>.
We go hits and people have sufficient stockpiles.
Okay. That's helpful.
[laughter] seems like other companies and not much.
Much color on that.
It was more.
[laughter].
No I think I'm breaking out, but seems like a bit more.
Major was was weak because iron ore coal.
But minor bulk sale was pretty settings of soon that before so thank you I don't waste. So it doesn't just to elaborate.
Because obviously, we run various services and especially related to we sites a European steel industry paint industry.
The closure, we definitely saw a slowdown in these these might might minor bulks from what is normally a very steady business. So for us it became apparent and other areas of the world. It was literally tell you what we don't want an awful lot of prior to that will make do with what we've got so for us it was a bit of a standout.
And can you give us an idea of certainly the Tony Your cargo book is you look ended the second half of the year.
There's been a pick up over the first half of your how did the first class look from a cargo standpoint, if you could just skip it sort of the flavor on what what you've seen it sounds like.
Tying into your comments about the minor bulk industry that.
You know you're seeing.
A pickup over the second half the year and those that.
Is that in fact happening with the cargo Burke.
Yes.
Where some of our long term services, where.
A little bit depending on where the services was going to wait which countries. Obviously I. You should go ahead first bought by locked down. So we we definitely saw a slowdown in Chicago to Asia Europe continued and then let's say going into Europe, and other areas, but we have seen a a stronger surgeons on certain about quarter.
Rides others of course, Oh still being here because countries is still suffering from from Corona and like a a lot of shipping a especially on the smaller sizes, we tend to be shipping into developed economies.
And some of these countries if anything hard hit so we have some very good news on some but others were having to be a little bit more patient before those trades a return.
I was so.
Can you talk about your fleet when you look at.
The Pebble Beach is coming and Ultramax in the fourth quarter, 2000, 2020, but the pine hearse charter.
It is going to expire.
One is is is is the pine Hurst.
Acquisition or purchase option attractive skewed how should we be thinking about that.
Relative to your plans over the second half of the year.
Sadly no it was for for quite a chunk of the charter where we didnt have the option to buy her.
At the moment no.
As we side with a lot about long term Japanese relationships as charters come up if the Ono wants to dispose there should find but invariably we find we can extend the week at the potential of this far like other we could well extend house to slightly longer hi, guys retiming of that option a fast slaves. So it is ongoing.
Discussions with with Japan, Obviously, Japan is being very hard hit by a an awful lot of western known as renegotiating already getting and so that those ah customers all of the Japanese that have performed during this time I wish I must say there aren't many we tend to get very favorable so if we'd like to extend are they willing so.
It's all part of long term relationships on the old fashion, but we do find it works and especially in environment like this where you're trying to capture now forward potential so those relationships what well. So if somebody were continually looking at the ships were taking.
And we replace existing ships in the fleet with better ones at a more attractive levels, it's an ongoing.
Program.
Okay, and then your problem, but you know with it or.
On the Drybulk side is that right now the short term charter in Burqas around 1300 opened first half of the year.
Can you talk about how that looks over the second half of the year.
Steve you want to take that well yes.
I'll I'll I'll tell you.
The chart in right for the quota for the for the first off the is just over 12000, and then we had the GE a night to that which takes into other 13 and it's it's just below the 12 month for the outlook for the for the remainder of the site is coming down some of them all extensive ones have redelivered.
Thats around in that fits us I faced tough and outlook for the remainder of the around the 12.
Excluding GNS, which and thousands dollars.
I apologize takes you to Boston.
Added gaze your Liberal days.
At about 12.
Well.
Oh, it's 1300 over the first half of this year amongst this looking for.
How that might change over the second half a year.
Well, that's you know you know that.
So again, that's the pain, but it's pretty stable because we've got we got some some small coming in.
They ended the year and one redelivery and I guess overall as well they that popped. It is not predictable is the short term days, you know and that's depends on.
Really it's a logistics business, where it depends on whether we need to bring in short term.
So to optimize the oneq.
Yeah, I cannot just that the folks that Steve says.
In some ways it tailed off a little bit as we went into two Q2 as we we've always running basis. If this book of short term Peter it ships with optional periods and as the market collapse, we live with those ships now as the market turns around if the opportunities that short term operating days should go up where we have coal business. We can use these.
So for a copper laden leg, so have the optionality and whether we extend them and that's all dependent on the on the market. So the advantage of running a short term book as well is when the bulk it does create I'd like it did you into Q1 into Q2, we have the ability to relive the ships all within the charter stipulations and then we can read.
Load hopefully lower levels with more optionality as we go forward.
Great. Thanks, among when you look at your.
Both of the first off the year on them what.
Third quarter.
It looks like the Republic study modest could you just look at sort of the six month timeframe can you give us an idea just your your first half 2020. Its first would you twosies Burke look like by quarter sequentially. If you had that data available.
Dave.
No I read that we don't report quarterly and.
It's it's not of I mean, if we if we didn't quarterly reports and they were just as a quarterly say it it's not something that we had available at our fingertips, we have that available, but we don't disclose it.
When you kind of it.
I had a very high level.
We obviously good guy named into Q1 with a certain amount to cover because obviously Q1 is always notorious rule. We assumed it was any Chinese new year, not what was going to happen next.
And also the with the IMO 2020, having clean do without vessels during Q4, and a basically had them so to the cardinals with compliance fuel going and when we saw this spike in the fuel prices.
The spread of three $400 or we had a far cheaper fuel on board, which were able to capture the earnings obviously as you go in into Q2 that drops a bit and then the indices pick up and obviously whenever the indices pick up a shelf is they have you were saying element of catch up as well until you get back to the level the playing field. So.
Let's say you said, we thought that it is Q1 to be honest treated this is pretty well considering in Q2 was we were on this very early back at the end of January into Corona mode, but it's always right devote because it goes so little business was out there and.
I'm trying to get people to commit and those that would commit.
Well some levels, it's been really become worthwhile.
It was yes.
So degree I tell you lived.
To harvest within that but overall, we were very pleased with the weather over a result, and coming forward. How we Oh, we have managed to capture this uptick now.
Well go Pablo Thank you.
Thanks Bye.
Thank you gentlemen, there are no further questions.
Okay. Thank you operator, thank you everyone.
Thank you.
Bye bye.
Thank you that does conclude our conference for today. Thank you for participating you may now disconnect.
[music].