Taylor Maritime Investments Limited, the specialist dry bulk shipping company,today announces that as at 30 June 2023 its unaudited NAV was $1.56 per Ordinary Share compared to$1.71 perOrdinary Share as at 31 March 2023. The Company is also pleased to declare aninterim dividend in respect of the period to 30 June 2023 of 2 cents per Ordinary Share. The NAV total return for the quarter was -7.6%.
Key Highlights (to 30 June 2023)
· TMI made further progress reducing its debt by$12 million from net proceeds generated from the sale of a 2008 built 32k dwt Handysize vessel, which generated an IRR of c.63% and MOIC of c.2.0x. This resulted in a debt to gross assets ratio of 28.5% for TMI atquarter end (27.7% as at 31 March 2023)
· Grindrod repaid approximately $28 million of debt from operations and proceeds from vessel sales completed during the quarter, resulting in an estimated debt to gross assets ratio on a ‘look through’
[1] basis at 30 June 2023 of 37.8% (38.9% as at31 March 2023)
· During the period, Grindrod agreed the sale of a 2011 Chinese built 33k dwt Handysize vessel for gross proceeds of $10.8 million, with expected delivery by the end of August
· The combined owned fleet comprised 47 vessels at quarter end (TMI 22 [2] and Grindrod
25 [3]). The Market Value of the fleet was $880 million [4] (TMI $331 million and Grindrod $549 million which excludes chartered-in ships without purchase options), a decrease of approximately 5.7% on a like for like basis over the quarter
· The net time charter rate for the TMI fleet was$10,600 per day at quarter end, outperforming the adjusted BHSI (Baltic Handysize Index) Time Charter Average (net) [5] which stood at $6,712. TMI’s balanced chartering strategy continued to mitigate the impact of softening dry bulk markets emanating from a slower-than-expected economic recovery in China and macroeconomic headwinds impacting demand
· The average charter duration for the TMI fleet stands at three months, with a large portion of the fleet positioned to capture improvements in the charter market expected in the latter part of 2023, and the average annualized unlevered gross cash yield was 7.9% at quarter end
· The blended net time charter equivalent (TCE) across the TMI and Grindrod fleet was $12,735 per day for the quarter (including Handysize and Supra/Ultramax vessels)
· On 1 June 2023, Henry Strutt was appointed Non-Executive Chair of the Company with the Interim Chair Frank Dunne remaining as Senior Independent Director
Post-Period Trading Update (since 30 June 2023)
· Since quarter end, TMI agreed the sale of two vessels to Grindrod on an arm’s-length basis. The transactions include a 2011 built 38.5k dwt Handysize vessel due to complete in July for $15 million net proceeds and a 40k dwt Handysize newbuild due for delivery in Q1 of calendar year 2024 for net proceeds of $33.75 million
· Together, these transactions achieve a balance of strategic fleet management, improving the overall attractiveness of the fleet profile of TMI and Grindrod and keeping an optimal number of ships operational ahead of the expected improvement in rates to come in the latter part of 2023, whilst also supporting TMI’s de-gearing plans
· Since quarter end, TMI agreed one long-term charter of 20 to 24 months at a net time charter rate of $12,000 per day with a blue-chip charterer, a rate significantly above thecurrent index reflecting positive forward market sentiment and the benefits of broader chartering opportunities arising as a result of the Grindrod investment chartering opportunities arising as a result of the Grindrod investment
· On 13 July, Grindrod announced an EGM to be held on10 August 2023 to propose a capital reduction which would result in a total cash distribution of up to a maximum of $45 million, of which up to a maximum of $37 million would be payable to TMI in line with its 83.23% ownership. The surplus cash available to fund the proposed capital reduction has been generated from recent vessel sales after accounting for related debt repayments. Should the capital reduction go ahead, with any initial distribution expected to be made within financial year Q3, TMI would use proceeds to further reduce debt
· TMI has covered 26% of fleet days for the Financial Year ending31 March 2024 at a time charter equivalent rate of c.$12,100 per day
Commenting on the trading update Edward Buttery, Chief Executive Officer, said:
“Despite current pressure on rates we continue to outperform our benchmark index thanks to our balanced chartering strategy. Asset values remain above historical averages and the building blocks of an improved earnings environment for the next two years are evident. We continue to prioritise debt reduction and delivering synergies by integrating management of the TMI and Grindrod fleets and making the most of opportunities given our enhanced scale so we’re in a strong position to capitalise on market improvements when they come.”
Dry bulk market outlook
After showing signs of improvement at the end of Q1 of the calendar year, demand disappointed in Q2 as China’s expected recovery failed to materialize with the BHSI decreasing by 35% from 31 March to 30 June. Asset values, however, held up relative to charter rates through the quarter, decreasing by 8% (Clarksons 10 year old 37k dwt Handysize vessel benchmark) reflective of more positive forward sentiment with improving industrial trends and re-stocking in China expected, and ample seaborne grain supply from record harvests to meet firm demand across key importing regions. As a result, charter rates may improve towards the latter part of the year before the onset of the typically softer holiday period from Christmas through to the Chinese New Year.
Overall, the combined minor bulk and grain trade is forecast to grow by 3.0% in 2023 in tonnemile terms according to Clarksons and by 3.9% in 2024 when market analysts anticipate a structural recovery in the Chinese economy driven by further policy support in line with the Chinese Government’s stated ambitions of delivering long-term, sustainable growth.
Meanwhile, several years of limited newbuilding activity will see Handysize fleet supply growth of 3.0% in 2023 followed by modest 1.3% growth in 2024 as environmental regulations are expected to lead to increased demolition of older, less efficient tonnage. The Supra/Ultramax fleet is forecast to grow by 3.0% in 2023 and 2024. Newbuilding activity is expected to remain constrained given shipyards are generally full until the second half of 2026 with orders from other segments dominating and uncertainty over future fuel choices deterring newbuild ordering. Given this tightening supply picture and forecasts of positive demand growth, we maintain a favourable view for 2024 and 2025 for both charter rates and asset values.
Financing
TMI’s debt balance stands at$210 million, down from $222 million at the end of March, which represents a debt to gross assets ratio of 28.5% based on Fair Market Values as at end of June (27.7% as at 31 March 2023).
Grindrod’s estimated debt balance was$178 million with a ‘look through’ debt to gross assets ratio of 37.8% based on end of June Fair Market Values (38.9% as at 31 March 2023) (including TMI and Grindrod debt).
After applying $15 million proceeds to repay debt from the additional TMI vessel sale, due to complete within July 2023, TMI debt to gross assets will reduce to 26.8% based on June Fair Market Values.
TMI’s priority is strengthening its balance sheet consistent with its long-term commitment to a prudent capital structure. TMI will continue to reduce its debt from agreed and planned vessel sales as well as from proceeds from the proposed capital reduction by Grindrod. TMI remains focused on achieving the 25% target for TMI of debt to gross assets and this is supported by a similar strategy at Grindrod.
ESG
During the period, a further two TMI vessels were fitted with energy saving devices including boss-cap fins, high performance paints, pre-swirl ducts and fuel efficiency monitoring systems.
The carbon intensity of TMI’s fleet, as measured by the EEOI (“Energy Efficiency Operational Index”), improved by 18% y-o-y over the FY22 period, primarily driven by the divestment of lessefficient vessels, installation of energy saving devices and other efficiency initiatives onboard.
TMI continues to work closely with its commercial and technical managers to ensure the fleet is compliant with the new industry decarbonisation regulations that came into force in January 2023, designed to meet the IMO’s 2030 GHG reduction targets.
Source: Taylor Maritime
