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spk00: Thank you for standing by, ladies and gentlemen, and welcome to Grinrod Shipping Holdings Limited conference call on the fourth quarter 2021 financial results. We have with us Mr. Martin Wade, Chief Executive Officer, and Mr. Stephen Griffiths, Chief Financial Officer of the company. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session, at which time, if you wish to ask a question... You will need to press star 1 on your telephone keypad and wait for the automated message advising your line is open. I must advise you the conference is being recorded today. We now pass the floor to one of your first speakers, Mr. Martin Wade. Please go ahead.
spk04: Slide 2. Let me please refer you to slide number 2 with the forward-looking statement disclaimer. On this call, we will make certain forward-looking statements, including statements regarding our future financial and operating performance. These statements include information regarding future time charter contracts, outlooks for the dry bulk markets, and other operating matters. These statements are based on the beliefs and expectations of management as of today. Our actual results may differ materially from our expectations. Investors should read carefully the risks and uncertainties described in the slide presentation and in yesterday's press release, as well as the risk factors included in our annual report and our other filings with the SEC. We assume no obligation to revise or update forward-looking statements, whether as the result of new information, future events, or otherwise, except as required by law. In addition, during this call, we will be discussing certain non-GAAP financial measures. Additional disclosures relating to these non-GAAP financial measures, including reconciliation for the most directly comparable GAAP measures, can be seen in yesterday's press release and pages 24 to 26 of the slide deck, which is posted on our website and our filings at the FCC. Please turn to slide four for an overview of our fourth quarter and year end 2021 natural results. Greenrod Shipping enjoyed overall record financial results during the fourth quarter and full year 2021, taking full advantage of the improved dry bulk market conditions as well as our operational model. But the fourth quarter and full year 2021 Adjusted net income was $54.6 million, or $2.88 per ordinary share, and $122.4 million, or $6.39 per share, respectively. In addition, we enjoyed adjusted EBITDA of $73.2 million and $206.9 million for the respective periods. Executing under our share repurchase program, We accelerated our repurchases during the fourth quarter at highly accretive levels to our financial metrics per share with a total of $10.2 million or 700,491 ordinary shares repurchased in the open market on NASDAQ and the JSC at an average price of $14.58 per share. The full year 2021, we repurchased a total of $11.9 million, 825,163 ordinary shares in the open market on NASDAQ and the JSC at an average price of $14.39. As of December 31, 2021, we have materially enhanced our liquidity. and finished the year with cash and equivalents of $104.2 million and restricted cash of $9.5 million. Now, please turn to slide five to look at our fourth quarter operational highlights and recent developments. We exercised our option to extend the firm chartering period of the 2014 built Supermats bulk carrier IVS Naruro for 12 months at $13,000 per day, starting from January 21, 2022. This vessel has two additional one-year options to extend at $13,000 per day for each extension year. The purchase option on this ship is exercisable in Q4 2022, subject to contract terms and conditions. As a reminder, Grinrod Shipping has five remaining purchase options, which you will find on slide 22 of this presentation in our charter and fleet update, providing the value of our long-term charter and vessels and associated purchase options. Regarding our recent developments on February 16, 2022, our Board of Directors declared an interim quarterly cash dividend of of $0.72 per ordinary share payable on or about March 22, 2022 to all shareholders of record as of March 11, 2022. Together with the $10.2 million of shares repurchased during the fourth quarter 2021, which is equivalent to a further $0.55 per ordinary share, Greenrod Shipping will return capital equivalent to a total of $1.27 per ordinary share to shareholders. The Board elected to maintain the same dividend per share as the third quarter, despite materially higher share repurchases during the quarter due to the continued extraordinary strength in our financial results and our strong balance sheet. Now I'll pass the floor over to Steve Griffiths, our Chief Financial Officer. We'll go over the financial highlights and performance for the fourth quarter of 2021. Steve?
spk02: Thank you, Martin. Turning to slide seven. During the fourth quarter of 2021, we continued to achieve strong results due to the robust market conditions and the earning power of our expanded owned fleet following the acquisition of the remaining portion of our RVS bulk subsidiary. In this context, revenue increased to $142.5 million for the three months ended December 31, 2021, compared to $55.7 million in the same period 2020. First profit increased more than tenfold to $66.7 million in Q4 2021 compared to $4.5 million for the same period 2020. Net profit attributable to owners of the company for Q4 2021 increased to $52.9 million or $2.79 per ordinary share compared to a loss of $6.2 million or a loss of $0.33 per ordinary share for the same period 2020. On the right-hand side of slide eight, we go to the full year 2021. Gross profit increased to $176.9 million for the full year 2021 versus $4.1 million for the same period 2020. Net profit attributable to owners of the company for the full year 2021 increased to $122.1 million or $6.38 per ordinary share versus a loss of $32.7 million or $1.72 per ordinary share for the same period 2020. Turning to slide eight, we were able to materially enhance our cash and liquidity during the full year of 2021 as cash and restricted cash increased by $63.2 million while simultaneously reducing our debt by $32.7 million, all while adding a previous long-term chartered ship to our own fleet at a favorable level. We believe Greenrod Shipping is well-positioned to pursue its growth and capital return strategies. On slide 9, we provide our bank loans and other borrowings repayment profile at December 31, 2021. Limited debt maturity until 2025, combined with a conservative amortization profile, provide us with optimal balance sheet flexibility going forward. Overall, we maintain low leverage, especially on a net debt basis, and this is even lower when you take into consideration the market value of our fleet, which is comprised mainly of modern Japanese-built ecovessels. Slide 10, we will now briefly discuss results in the dry bulk business for the fourth quarter of 2021. Andy Saas TCE per day was $28,842 for the three months ended December 31, 2021, versus $8,395 per day for the same period, 2020. For the 12 months ended December 31, 2021, Andy Saas TCE per day was $21,336 versus $6,629 for the same period, 2020. Supramax Ultramax TCE per day was $50,089 per day for the three months ended December 31, 2021, versus $10,937 per day for the same period December 31, 2020. For the 12 months ended December 31, 2021, Supramax Ultramax TCE per day was $23,608 per day versus $10,072 for the same period 2020. As of February the 14th, 2022, we have contracted approximately 1,103 operating days at an average TCE of $21,911 per day for our handy-sized and approximately 1,474 operating days at an average TCE of $24,374 per day. for our Ultramaxes. The average long-term chartering cost per day for the Supermax Ultramax fleet for the first quarter of 2022 is expected to be approximately $13,057 per day. Now turning to slide 11, the scale of the rise in the drought rate rates is easily demonstrated versus our historical results. During the full year 2021, approximately 90% of our fleet was predominantly trading either on index-linked cargo contracts, short-term time charters, or in the spot market, leaving our company exceptionally well-positioned to take advantage of the strong freight-based environment. To put this into context, every $1,000 change in TCE per day equated to approximately $10.8 million of TCE revenue during the full year 2021, and that's for our core fleet. I just want to add that although we are seeing a weaker Q1 2022 environment compared to the second half of 2021, we are still well above market rates for the same period last year, and our secured days for Q1 are rates above the indices to date in the quarter. Now turning to slide 12, it shows the core fleet cash break-even analysis for the full year 2021. Our own fleet breakeven was $11,121 per vessel per day, while the core dry bulk breakeven was $11,910 per vessel per day, including long-term chartering vessels. The cash breakeven rate per day includes operational expenses, net G&A, interest expense, and debt repayment. You can contrast these figures to the daily TCE rates in the previous slide to assess the robustness of our profitability. But with that, I would like to return the call back over to Martin.
spk04: Thanks, Steve. Now please turn to slide 14 to look at the fundamentals of the dry-bulk sector and how they have been developing against the new market environment. 2021 saw a material pickup in coal demand driven by global energy shortages, together with strong minor bulk demand, which is closely correlated to global GDP and reflected the global economic recovery from widespread COVID-19 lockdowns in 2020. In 2022, the expectation is for minor bulk and grain trade growth to outpace the growth seen in the coal and iron ore sectors, as coal trade growth normalises from the very strong growth seen in 2021. Antisizes and supramaxes continue to be helped by congestion in the container shipping business, which is leading to certain bagged and break-bulk cargoes like scrap steel returning to bulk carriers. Now please turn to slide 15. As the slide depicts, iron ore trade slowed in 2021 versus the prior year due to Chinese steel production restrictions. However, coal rebounded nicely, while grain demand lagged 2020 levels. Minor bulk demand, which is our main focus, has rebounded materially, driven partly by the steel, forestry, cement, nickel ore and alumina trades. Trade growth demand in 2022 and 2023 is expected to be led by minor bulk cargoes and grains, key cargoes for the handy size and supermax sectors. Now turning to slide 16, the dry bulk order book continues to shrink to multi-decade lows. The order book is estimated at only 6.8% of the fleet, with approximately 70% of the dry bulk fleet 15 years or older and approximately 7% of the dry bulk fleet 20 years or older. Despite strong market conditions, new ordering remains constrained by uncertainty relating to engine technology and emissions. 2022 and 2023 supply growth for the dry bulk fleet overall is forecast to be around 2% and 0.2% respectively, while handy size and supermax supply total order books continue to be the smallest in the dry bulk fleet at 4.7% and 6% respectively. Now turning to slide 17, while we saw handy size and supermax spot TC rates decrease at the end of 2021 and early 2022, we are now seeing the market strengthening as we have passed the Chinese New Year holidays and as we approach the end of the Winter Olympics in Beijing. Looking at the chart on the right-hand side, handy-sized supermax asset prices increased material over the course of 2021 and have remained largely flat over the last six months, while handy-sized prices have continued to rise. Slide 19. Let's turn to slide 19 for our conclusions and strategy. Let's start with our achievements in 2021. As reported earlier, the strong dry bulk market conditions in 2021 led to our highest financial results since our spin-off and listing, while our commercial strategy has demonstrated its potential with material profits generated from both our long- and short-term chartering vessels, along with in-the-money purchase options in the future. On the corporate side, we implemented a new dividend and capital return policy in the third quarter, resulting in cash dividends for the year of $1.44 per share and $11.9 million in highly accretive share repurchases. Also in 2022, we completed our first secondary offering, which has benefited all shareholders through materially increased daily trading liquidity, a stronger US institutional shareholder base, more equity research coverage and increased market float in the U.S., which has now reached over 40% of shares outstanding as of January this year. Now, looking ahead, dry bulk freight rates declined from exceptional levels to merely strong levels late in the fourth quarter of 2021 and early into 2022. They'll have started to rebound again in recent weeks. The smallest new building order book in decades supports market recovery due to constriction in vessel supply growth as demand continues to recover. Due to record amounts of new container ship orders thus far in 2021, even if tripod orders were to pick up materially, limited shipyard spare capacity means that most new orders could not hit the water until 2024 at the earliest. The extent that demand continues to grow even moderately, the lack of available supply growth combined with EEXI environmental regulations in 2023 is expected to lead to an attractive potential multi-year window for the dry bulk market. With this, I thank you all for joining our call today and looking forward to reporting further progress on Grimrod shipping. With that, we'd like to open up for questions. Operator?
spk00: Thank you. We will now begin the question and answer session. If you wish to ask a question, please press star and 1 on your telephone keypad and wait to be advised your line is open. Please state and spell your first and last name before you ask your question. If you wish to cancel your request, please press star 2. Once again, star and one to ask a question. Thank you. We will now take our first question. Please go ahead. Your line is open.
spk03: Howdy, Martin and Steve. It's Randy Givens from Jefferies. How's it going? Very well.
spk04: You don't have to introduce yourself, Randy. We get it. We know who you are.
spk03: No, I'm just following instructions. Try to be compliant over here. Anyway, congrats again. Great quarter. Another big dividend. Share buybacks. Doing the right thing. You've clearly had an incredible year. Accomplished a lot. So where does the company look to go from here? Any appetite for maybe second-hand acquisitions outside of or what are the plans going forward?
spk04: Well, obviously, we're in a very fortunate position. And as you already say, we capitalize to the full extent on the market. Second-hand pricing is interesting because it has reached pretty fruity levels. And with our five, six purchase options on our existing ships at incredibly attractive levels, we view that as the prudent way to maybe sell a couple of our older handers, especially ahead of EXI in 2023. And basically where we can be selling hand is, and with the proceeds, buying, exercising purchase options and buying for cash, modern Ultramaxes. We think that's the smart way to go. So never say never, but some of these prices are getting pretty high. And we want to keep a modern fleet. And if you start looking at modern ships, but as usual, with dry cargo, it's looking good. But to be gambling, I think we've put ourselves in such a good position, like a lot of owners now, great balance sheet, loads of cash, reduced down debt. I think it really is a time. And with our operating model, the ability to take ships on from our Japanese friends for a period, I think that's where the value is going to lie.
spk03: Derek?
spk02: If I can add to what Martin said, in terms of allocation of cash at this stage, rather than previous difficult markets, where is the cash coming from? As we said, we have fixed our balance sheet and improved liquidity with these strong earnings. Obviously, as per our dividend and capital return policy, we look to return cash to shareholders by way of dividends and share buybacks. And then also Martin has mentioned that, you know, they exercise these purchase options on our long-term fleet. You know, we want to start doing that now, not all at once, but over a period. You know, the total cost of all of those ships is $108 million, so certainly we can put our money to work. And then, of course, you know, we're looking to pay down some debt so we can get our daily tax break even down.
spk03: Got it. Yeah, that makes sense. And then looking at your fleet here and your operations, clearly strong quarter-to-date rates, especially during the seasonal soft 1Q. I guess where is the market maybe currently today? It might be a little higher than your quarter-to-date rates. And then longer term, I was looking at the forward curve and one-year time charter rates this morning. Have you looked into booking some vessels on medium or one-year plus time charters?
spk04: Yeah, obviously we benefited, and we've had a very good January into February. As rates are now picking up with the forward paper, I mean, March is being quoted at 27,000. It'll always be a bit of a struggle to actually go through, but I think that the whole Q1 figures are going to be pretty good. I mean, the average at the moment, the BSI is averaging a tick over 20,000. Obviously, we're well ahead of that so far, and the hand is just below 19,000. Sorry, just below 20,000. But I think we're well-placed there. And then we'll go forward. It's looking good. Obviously, starting this year as it is, I mean, it's great to actually have a profitable Q1. It's been an awful long time since anyone in dry cargo shipping reported that. And again, reasonably predictable with, you know, China signaled with blue skies for the Beijing Olympics, slow things down. And it's now interesting, of course, literally as Chinese New Year starts, you start to see a pickup in demand. China has relaxed... credit rules and is encouraging more spending on real estate and infrastructure, allied to the fact that they took a bit of a hatchet to iron ore prices, which is always quite a positive for their buyers. And going forward, cover, it's an interesting one, yes, because, of course, one-year rates are are looking attractive. So it's not something we've done up to now. The shifts we have been putting out have tended to be four to six months, five to seven. But it is something, as we move forward, we will start to look at, especially if our cost base is so low. And again, it's always the case of the right signature and people that we trust to pay. But I think, you know, we might start looking at a little bit more cover, you know, having basically run naked to the market last year. although we do have our core business index linked, so we operate around that. But as this market develops, of course, common sense dictates that we should be potentially locking in some earnings.
spk03: Sure. That's a fair balance. That's it for me. Congrats again. Thank you. Thanks, Randy. Appreciate it.
spk00: Thank you. Your next question comes from the line. Sorry. Please go ahead. Your line is open. Thank you.
spk01: Great. Good afternoon, Martin. Good afternoon, Steve. This is Pofrat from Noble Capital Markets. I need more of an introduction than howdy-doody. What, you know, Randy covered a lot of the ground, but you didn't ask about, you know, specifically the option that you have that expires at the end of the year. You know, can you just talk about how you're looking at that and, you know, especially with the, you know, the options that you have, you know, with below market rates? You know, are we looking at a similar scenario to what happened last year with, you know, a situation where you might be able to, you know, buy this at a pretty significant discount even with the purchase option stated at 15.6%?
spk04: Yeah, that ship, that actually purchase option runs through, and if we don't declare it next year, we can declare it the year after or the year after. So that ship sits there. We have one other that the charter expires this year, so we will be looking at that purchase option. But again, Steve, on the financial figures, if These ships are very cheap, and we actually buy them and pay cash for them. Obviously, it comes onto our books at very, very attractive levels, reduces our whole cost of the fleet down. It's a great position to be in, and especially if we're able to sell some of our older handies, and with that cash, basically buy five, six-year-old ships, it's very positive. It's a great decision to be in. We had a a very positive board meeting yesterday, and it's nice to be able to discuss this. And I think it's now just a matter of timing when we want to pull the trigger.
spk01: All righty. And then if we could talk about the dividend policy. You know, you paid out well over the stated minimum on your reported earnings per share, and you even more than made up you know, the share purchase and kept the cash portion at 72 cents. How should we be looking at 2022 as far as the dividend? You know, it doesn't seem like share buybacks are at this point in time as likely as they were in the fourth quarter. So how should we be looking at the, you know, the cash dividend in 2022, especially over the first half of the years? you know, when you do have that seasonal weakness. I'll let Steve answer this one.
spk04: I'm sorry, Poe. I'm sorry. Yeah, I'm sorry. We stuffed up your research there a little bit. We apologize for that. I know you'd calculated correctly and what we did, yes. And Steve will answer it. But it's a nice position to be in.
spk02: Yeah, Poe, there's a couple of things here, and hopefully I'll be able to answer all your questions. So, yeah, in this quarter, the board... We decided that due to the strong dry bulk markets and our healthy cash and liquidity position, that we wouldn't deduct the full amount that we had spent on share barbacks. And we decided to keep the dividend the same as the previous quarter. And again, just for a bit of background, if we had deducted the full amount of the share barbacks, the dividend would have been $0.33. And if we had reversed the full share barbacks, the dividend would have been $0.88. So, you know, this quarter, the share purchase amounted to the equivalent of $0.55. And with the dividend at $0.72, you know, the two of those adding up together, we did distribute more than what our policy said for 30%. This quarter, it was 43%. But what we must say is that don't take this as a sign that if we have share buybacks later in the quarter that we won't deduct it from our dividend. You know, a decision will be made based on the circumstances at each quarter. And in terms of are we going to buy back Again, it's all share price dependent. We have the ability to buy back and we just be watching the share price.
spk01: Great. If you could just expand on the minimum is 30%. If it were all cash right now, you'd still see a pretty big drop in the first quarter dividend, the fourth quarter dividend. And Your liquidity position is likely to get better over the course of 2022, especially even in the first quarter of 22. So how should we be looking at the cash dividend?
spk02: I think the intention is to stick to that policy. As we said, we're looking to pay down some debt. And, you know, the cost of all of these optionships, even though they're all in the money, the cost of the total of the five optionships is over $100 million. So we can't put that money to work, and we just want to find a good balance.
spk01: Okay. And then, Martin, can you just talk about, you were talking about potentially lengthening the book and you know, you're only booking right now four to six months out in advance. And, you know, potentially you look at it like in a book. But the other thing that's interesting out there is that candies are trading close to supers and ultras. And it sounds like it's more related to the container market, you know, congestion and what's going on in the container market. But can you just address that, you know, situation and how much longer you expect it to, to continue?
spk04: Interesting, yeah, because obviously we have benefited hugely from what's happening in the container market. But also, if you look at the whole handy fleet, especially, you know, when we report, we basically got a fleet of 33,000 tonnage. We have some 37s. The Baltic index is premised on the 37s. So we're actually beating the index on smaller ships. And those smaller ships, of course, are very popular. And the Q4 last year, basically no handy sizes delivered at all. And that book, that whole order book is non-existent. And the existing fleet is getting older. So like everything with emerging markets and new trade routes and what's happening in the world generally with trade routes changing, these ships are really coming into their own. So it is obviously massively helped by the liner side, but there is really genuine new trades opening up for these ships because of deadweight draft that the bigger ships can't get into and they need gear. It's very, very exciting. A size that a few years ago was basically being written off has now really come into its own and with no new ships coming. So that really, really does excite us. And, yeah, I mean, Supermax earning the same as Hand is and both earning vastly more than Cates, which, of course, once upon a time it could never have happened. Now they've disconnected, and Super as Hand is. But, yeah, it's really, really exciting. And I think a lot of trade has changed, and maybe some people are a bit slow to actually realize exactly what has happened, and the hand is our, yeah, they come into their own, and they've got a long way, a lot further to go by the look of it.
spk01: So you would argue it's more structural than just, you know, somewhat temporary factors?
spk04: It's a combination, but literally with no new ships delivering. And if you actually go back to the bad markets, especially 2020, a lot of ships were scrapped. So I think it's structural as well that we are ending up with a size of ship that has a definitive market. and no new supply coming along. And the icing on the cake, of course, is the container side, where we have a few ships on charter to what would normally be kind of container or break-bulk operators carrying containers. And I don't think that's going away, because obviously the fact that there is a shortage of some of these container ships, and by taking bulk carriers, we're very flexible and we can go into certain ports, we have the gear, You never quite know in shipping, but structurally something has changed, and that is very positive.
spk01: Great. Well, I look forward to seeing what 2022 holds in store for us. Thanks for your time. Thanks, folks. Very exciting times.
spk04: Appreciate it.
spk00: Thank you. I'll now hand the call back to Martin to close.
spk04: Thank you very much, everyone. Thank you for listening to us. It's great results, even though we say so ourselves. Very exciting times, and things are looking very, very positive going forward. So thank you again for joining our presentations call. Yeah, thanks, everyone.
spk00: Thank you. That concludes our conference for today. Thank you for participating. You may now disconnect.
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