UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16 OR 15D-16 OF THE SECURITIES EXCHANGE ACT OF 1934

For the month of August 2022

Commission File Number 001-38440

Grindrod Shipping Holdings Ltd.

#03-01 Southpoint

200 Cantonment Road

Singapore 089763

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F x Form 40-F ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨.

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨.

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.  

INFORMATION CONTAINED IN THIS FORM 6-K REPORT

This Report on Form 6-K includes (1) Management’s Discussion and Analysis of Financial Condition and Results of Operations for the six months ended June 30, 2022 and 2021 and (2) the unaudited interim condensed consolidated financial statements and related notes of Grindrod Shipping Holdings Ltd. for the six months ended June 30, 2022.

This Report on Form 6-K is incorporated by reference into the Registration Statement on Form S-8 of Grindrod Shipping Holdings Ltd. (Registration Number 333-263494). 

Table of Contents 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Report on Form 6-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to our financial condition, results of operations, cash flows, business strategies, operating efficiencies, competitive position, growth opportunities, plans and objectives of management, and other matters.

These forward-looking statements, including, among others, those relating to our future business prospects, revenue and income, are necessarily estimates and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Accordingly, these forward-looking statements should be considered in light of various important factors, including those set forth below and in our other filings with the SEC. Words such as “may,” “expects,” “intends,” “plans,” “believes,” “anticipates,” “hopes,” “estimates,” and variations of such words and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based on the information available to, and the expectations and assumptions deemed reasonable by us at the time these statements were made. Although we believe that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. These statements involve known and unknown risks and are based upon a number of assumptions and estimates which are inherently subject to significant uncertainties and contingencies, many of which are beyond our control. Actual results may differ materially from those expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include, without limitation:

We undertake no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this Report on Form 6-K or to reflect the occurrence of unanticipated events except as required by law.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following management’s discussion and analysis of financial condition and results of operations together with our unaudited interim condensed consolidated financial statements, including the notes, and the other financial information appearing elsewhere in this Report on Form 6-K, and with our audited consolidated financial statements appearing in our 2021 Annual Report filed with the SEC. Certain information contained in this discussion and analysis and elsewhere in this Report on Form 6-K includes forward-looking statements that involve risks and uncertainties. See “Cautionary Statement Regarding Forward-Looking Statements” in this Report on Form 6-K and in “Item 3. Key Information—Risk Factors” of the 2021 Annual Report filed with the SEC for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in this Report on Form 6-K.

In this Report on Form 6-K, unless otherwise indicated, all references to “we”, “us,”, “Group”, “our”, “Company” and “Grindrod Shipping” refer to Grindrod Shipping Holdings Ltd. and its subsidiaries.

Overview

We are an international shipping company that owns, charters-in and operates a fleet of drybulk carriers. Our owned vessels are held in wholly owned subsidiaries but historically we owned some of our vessels in a consolidated joint venture arrangement. We operate in the drybulk carriers business, which is further divided into handysize, supramax/ultramax, and other operating segments. Activities that do not relate to these business segments are accumulated in an ‘‘unallocated’’ segment. We historically operated a tankers business, which was further divided into medium range tankers, small tankers, and other operating segments, however we completed the plan to discontinue the tanker business during December 2021 and have presented the tanker business as a discontinued operation.

Our handysize and supramax/ultramax operating fleet consists of 25 owned vessels and six long-term chartered-in vessels. We have 15 handysize drybulk carriers and 16 supramax/ultramax drybulk carriers in our operating fleet with sizes ranging from 28,240 dwt to 62,660 dwt. Our drybulk carriers transport a broad range of major and minor bulk and breakbulk commodities, including ores, coal, grains, forestry products, steel products and fertilizers, along worldwide shipping routes, and are currently employed in pools of similarly sized vessels or in the spot market or under contracts of affreightment (“COAs”).

With the sale of the two medium range tankers and one small tanker in the six months ended June 30, 2021, our tanker operating fleet was reduced to one owned medium range tanker that was 50,140 dwt in size which was sold on June 1, 2022. The remaining tanker was employed under a bareboat charter and carried petroleum products, which included both clean products, such as petrol, diesel, jet fuel and naptha, and dirty products, such as heavy fuel oil.

Recent Developments

Dividends

On August 17, 2022, the Company’s Board of Directors declared an interim quarterly cash dividend of $0.84 per ordinary share, payable on or after September 19, 2022, to all shareholders of record as of September 9, 2022 (the “Record Date”). As of August 17, 2022, there were 18,996,493 common shares of the Company outstanding (excluding treasury shares).

The following table sets forth certain summary information regarding our fleet as of the date of this Report on Form 6-K (except as otherwise indicated):

Drybulk Carriers — Owned Fleet (25 Vessels)

Drybulk Carriers — Long-Term Charter-In Fleet (6 Vessels)

Our Joint Ventures

Through varying times during the periods covered by this Report on Form 6-K, we have interests in joint ventures as set out below.

IVS Bulk Pte. Ltd.

Prior to February 14, 2020, we, through our wholly owned subsidiary GSPL, owned an approximately 33.5% interest in IVS Bulk Pte. Ltd., or IVS Bulk, a joint venture with Sankaty European Investments III S.à.r.l, or Sankaty, and Regiment Capital Ltd, or Regiment. Effective February 14, 2020, we increased our ownership to 66.75%. The financials of IVS Bulk were consolidated into our financial statements following the acquisition of the additional 33.25% rather than being accounted for under the equity accounting method, as had previously been the case.

On December 1, 2020, a loan of $4.0 million provided by GSPL to IVS Bulk was converted into equity in line with the new shareholders agreement. The transaction increased GSPL’s shareholding by 2.11% in IVS Bulk from 66.75% to 68.86%.

Effective September 1, 2021, we acquired the remaining ordinary shares in IVS Bulk 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.

Leopard Tankers Pte. Ltd.

As of June 30, 2022, we owned a 50% interest in Leopard Tankers Pte. Ltd., or Leopard Tankers, a dormant joint venture with Vitol, or our joint venture partner. Leopard Tankers owned four 50,000 dwt tankers, which were commercially managed by Mansel, an affiliate of Vitol, which received a management fee. This joint venture terminated and we acquired two medium range “eco” tankers from the joint venture, namely Leopard Sun and Leopard Moon, in January and February 2019, respectively, and our joint venture partner acquired the remaining two vessels from Leopard Tankers in February and March 2019. The financial results of Leopard Sun and Leopard Moon were consolidated into our financial statements following delivery of these vessels to us. Leopard Tankers Pte. Ltd. and its subsidiaries are dormant and are in the process of being wound up.

Components of Our Operating Results

Revenue.    Revenue includes vessel revenue, ship sale revenue, and other revenue. Vessel revenue consists of charter hire revenue and freight revenue. Charter hire revenue primarily relates to time charter contracts and freight revenue primarily relates to voyage charter contracts and historically in pool distributions (which consist of distributions to us of net earnings relating to our vessels in pools operated by third parties). Ship sale revenue includes ship sales as well as the sale of bunkers and other consumables relating to ships sold. Other revenue includes management fees and other revenue.

We generate revenue by charging customers for their use of our vessels or for the transportation by us of their drybulk cargoes. Historically, these services generally have been provided by operating our vessels in commercial pools, in the spot market, and on time charters. We also manage our charter rate risk and employment risk by using forward freight arrangements and entering into COAs.

The table below illustrates in general the primary distinctions among these different employment arrangements.

We also generate revenue by acting as commercial manager for vessels owned by third parties. The commercial management services we provide are in respect of our management and operation of our drybulk handysize pool, or the IVS Handysize Pool. Commercial management fees are charged per vessel as a fixed daily fee plus a fixed percentage of the TCE revenue achieved by the managed vessel.

Cost of sales.    Cost of sales includes voyage expenses which represent the direct costs associated with operating a vessel between loading and discharge at the applicable ports and include pool distributions (which consist of net earnings payable to third-party owners of vessels in the pools we manage), fuel expenses, port expenses, other expenses and freight forward arrangements; vessel operating costs, which consist of crew expenses, repairs and maintenance, insurance, and other costs associated with the technical management of the fleet; charter hire costs, which primarily relates to time charter contracts; depreciation of ships, drydocking and plant and equipment – owned assets; depreciation of ships and ship equipment – right-of-use assets; other expenses, which consist of freight expenses, cargo handling, provision for onerous contracts, and other logistic purchases; and cost of ship sale, which consists of cost of sales on sale of ships classified as inventories and cost of sales on sale of bunkers and other consumables sold with a vessel.

Other operating income (expense).    Other operating expense consisted primarily of foreign exchange loss, impairment loss on ships, impairments on intangibles and goodwill, impairment loss on right-of-use assets, impairment loss on the net disposal groups, impairment loss on financial assets for expected credit losses and other operating expenses. Other operating income consists of reversals of impairment loss on ships, reversals of impairment loss on right-of-use assets, dividend income, profit on sale of business, gain on disposal of assets, foreign exchange gain and other income.

Administrative expense.    Administrative expense comprise general corporate overhead expenses, including personnel costs, property costs, audit fees, legal and professional fees, and other general administrative expenses. Personnel costs include, among other things, salaries and short- and long-term incentives, pension costs, fringe benefits, travel costs and health insurance.

Share of profits (losses) of joint ventures.    Share of profits (losses) of joint ventures relates to profits (losses) attributable to our joint ventures. Our joint ventures are accounted for on an equity basis.

Interest income.    Interest income primarily relates to interest on loans to joint ventures; bank interests; and other interests.

Interest expense.    Interest expense primarily relates to interest on ship loans, interest on bank loans and interest determined under IFRS 16 that relates to leases.

Income tax (expense) benefit. Income tax (expense) benefit represents the sum of the tax currently payable, reversal of provisions for a tax related legal case and deferred tax. The tax currently payable is based on taxable profit for the period. Deferred tax is recognized on the differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable income.

COVID-19 Impact 

The COVID-19 pandemic has had, and continues to have, widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices. The measures taken across the globe to slow the spread of the pandemic led to an initial contraction in the worldwide economic activity which in turn contributed to lower charter rates and shipping revenues. Thereafter freight markets saw a strong rebound as demand for commodities recovered. Beyond the overall impact of the pandemic on rates, the direct, additional expense incurred by us specifically as a result of COVID-19 related factors has not been material.

As a result of certain direct and indirect effects of the COVID-19 pandemic, including changed cargo flows, drydocking delays and increases in crew travel costs, our costs and operating costs per day as reported for the six month period ended June 30, 2021 and the six month period ended June 30, 2022 have been higher than what they might otherwise have been. We have not attempted to quantify this effect since it would require making a number of significant assumptions. In an effort to reduce our exposure to these risks we have instituted measures to reduce the risk of spread of COVID-19 for our crew members on our vessels.

Other significant COVID-19 related factors that we have experienced during 2022 include:

The type of COVID-19 related factors and the severity, and financial and operational impacts on us of such factors in subsequent periods may not be the same as they have been to date. If the COVID-19 pandemic continues to impact the global economy on a prolonged basis, or if vaccines are not available on a widespread basis, the rate environment in the drybulk market and our vessel values may deteriorate and our operations and cash flows may be negatively impacted which could also negatively impact our ability to meet the debt covenants under our existing debt facilities.

Impact of the Russian-Ukraine Conflict

On February 24, 2022, the United States imposed additional sanctions on Russia in response to its invasion of Ukraine. Many of these sanctions are targeted at Russian banks and energy companies and Russian sovereign debt. The range of sanctions includes prohibitions on dealings in the debt or equity of certain Russian companies, as well as blocking sanctions imposed on many Russian individuals and entities. Similar sanctions have been imposed in coordination with the United States by the United Kingdom, European Union, and other countries.

The invasion of Ukraine by Russia and subsequent sanctions has impacted trade flows by reducing the supply of cargo from that region and increased ton miles as end users find alternative sources of cargo. If the conflict and sanctions continue to impact the global economy for a prolonged period, the rates in the drybulk spot market and our vessel values may be negatively impacted which could negatively impact our operations and cash flows.

Factors Affecting Our Results of Operations and Financial Condition

The principal factors which affect our results of operations and financial condition include:

Non-GAAP Financial Measures

The financial information included in this Report on Form 6-K includes certain “non-GAAP financial measures” as such term is defined in SEC regulations governing the use of non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s operating performance, financial position or cash flows that excludes or includes amounts that are included in, or excluded from, the most directly comparable measure calculated and presented in accordance with IFRS. For example, non-GAAP financial measures may exclude the impact of certain unique and/or non-operating items such as acquisitions, divestitures, restructuring charges, large write-offs or items outside of management’s control. Management believes that the non-GAAP financial measures described below provide investors and analysts useful insight into our financial position and operating performance.

TCE Revenue and TCE per day

TCE revenue is defined as vessel revenue less voyage expenses. Such TCE revenue, divided by the number of our operating days during the period, is TCE per day. The number of operating days used to calculate TCE per day also includes charter-in days.

TCE per day is a common shipping industry performance measure used primarily to compare daily earnings generated by vessels on time charters with daily earnings generated by vessels on voyage charters, because charter hire rates for vessels on voyage charters have to cover voyage expenses and are generally not expressed in per-day amounts while charter hire rates for vessels on time charters do not cover voyage expenses and generally are expressed in per day amounts.

Below is a reconciliation from TCE revenue to revenue for the six month periods ended June 30, 2022 and 2021.

Vessel operating costs per day

Vessel operating costs per day represents vessel operating costs divided by the number of calendar days for owned vessels during the period.

Vessel operating costs per day is a non-GAAP performance measure commonly used in the shipping industry to provide an understanding of the daily technical management costs relating to the running of owned vessels.

Long-term charter-in costs and Long-term charter-in costs per day

Long-term charter-in costs is defined as the charter costs relating to chartered-in vessels included in our fleet from time to time, which are vessels for which the period of the charter that we initially commit to is 12 months or more, even if at a given time the remaining period of their charter may be less than 12 months (“long-term charter-in vessels”). Such long-term charter-in costs, divided by the number of operating days for the relevant vessels during the period, is long-term charter-in costs per day.

Charter hire costs in the statement of profit and loss only includes charter costs that meet the definition of short-term leases in terms of IFRS 16 which, includes charter costs relating to some but not all of our long-term charter-in vessels, with the charter costs relating to the remainder of our long-term charter-in vessels presented as lease payments on ships. Accordingly, charter hire costs and lease payments on ships together comprise “adjusted charter hire costs”.

Long-term charter-in costs and long-term charter-in costs per day are non-GAAP performance measures used primarily to provide an understanding of the total costs and total costs per day relating to the charter-in of the Company’s long-term charter-in vessels.

Below is a reconciliation from long-term charter-in costs to charter hire costs for the six month periods ended June 30, 2022 and 2021.

EBITDA and Adjusted EBITDA

EBITDA is defined as earnings before income tax benefit (expense), interest income, interest expense, share of profits (losses) of joint ventures and depreciation and amortization. Adjusted EBITDA is EBITDA adjusted to exclude the items set forth in the table below, which represent certain non-recurring, non-operating or other items that we believe are not indicative of the ongoing performance of our core operations.

EBITDA and Adjusted EBITDA are used by analysts in the shipping industry as common performance measures to compare results across peers. EBITDA and Adjusted EBITDA are not items recognized by IFRS, and should not be considered in isolation or used as alternatives to profit for the period or any other indicator of our operating performance. 

Our presentation of EBITDA and Adjusted EBITDA is intended to supplement investors’ understanding of our operating performance by providing information regarding our ongoing performance that exclude items we believe do not directly affect our core operations and enhancing the comparability of our ongoing performance across periods. Our management considers EBITDA and Adjusted EBITDA to be useful to investors because such performance measures provide information regarding the profitability of our core operations and facilitate comparison of our operating performance to the operating performance of our peers. Additionally, our management uses EBITDA and Adjusted EBITDA as measures when reviewing our operating performance. While we believe these measures are useful to investors, the definitions of EBITDA and Adjusted EBITDA used by us may not be comparable to similar measures used by other companies.

The table below presents the reconciliation between Profit for the period to EBITDA and Adjusted EBITDA for the six month periods ended June 30, 2022 and 2021.

Adjusted net income and Adjusted Earnings per share

Adjusted net income is defined as Profit for the period attributable to the owners of the Company adjusted for reversal of impairment loss recognized on ships, impairment loss recognized on goodwill and intangibles, reversal of impairment loss recognized on right-of-use assets, impairment loss on net disposal group, loss on disposal of business, share based compensation and non-recurring expenditure. Adjusted Earnings per share represents this figure divided by the weighted average number of ordinary shares outstanding for the period.

Adjusted net income is used by management for forecasting, making operational and strategic decisions, and evaluating current company performance. It is also one of the inputs used to calculate the variable amount that will be returned to shareholders in the form of quarterly dividends and/or share repurchases. Adjusted net income is not recognized by IFRS, and should not be considered in isolation or used as alternatives to profit for the period or any other indicator of our operating performance.

Our presentation of Adjusted net income is intended to supplement investors’ understanding of our operating performance by providing information regarding our ongoing performance that exclude items we believe do not directly affect our core operations and enhancing the comparability of our ongoing performance across periods. We consider Adjusted net income to be useful to management and investors because it eliminates items that are unrelated to the overall operating performance and that may vary significantly from period to period. Identifying these elements will facilitate comparison of our operating performance to the operating performance of our peers. The definitions of Adjusted net income used by us may not be comparable to similar measures used by other companies.

The table below presents the reconciliation between Adjusted net income to Profit for the period attributable to the owners of the Company for the six months ended June 30, 2022 and 2021.

Headline earnings and headline earnings per share

The Johannesburg Stock Exchange, or JSE, requires that we calculate and publicly disclose headline earnings per share and diluted headline earnings per share. Headline earnings per share is calculated using net income which has been determined based on IFRS. Accordingly, this may differ to the headline earnings per share calculation of other companies listed on the JSE because such companies may report their financial results under a different financial reporting framework such as U.S. GAAP.

Headline earnings for the period represents profit for the period attributable to owners of the Company adjusted for the re-measurements that are more closely aligned to the operating or trading results as set forth below, and headline earnings per share represents this figure divided by the weighted average number of ordinary shares outstanding for the period.

The table below presents a reconciliation between Profit for the period attributable to owners of the Company to Headline earnings for the six months ended June 30, 2022 and 2021.

Results of Operations

Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021

Certain financial data on a consolidated basis and for our primary segments was as follows for the six months ended June 30, 2022 and six months ended June 30, 2021. This information was derived from our unaudited interim condensed consolidated financial statements for the respective periods.

Consolidated Results of Operations

Unaudited Interim Condensed Consolidated Statement of Profit or Loss and Comprehensive Data

Unaudited Segment Information

Set forth below are selected historical and statistical data of our operating fleet for the six months ended June 30, 2022 and June 30, 2021 that we believe may be useful in better understanding our operating fleet’s financial position and results of operations. This table contains certain information regarding TCE per day, vessel operating costs per day and long-term charter-in costs per day which are non-GAAP measures. For a discussion and reconciliation of certain of these measures, see “Non-GAAP Financial Measures” above.

The average long-term charter-in costs per day for the supramax/ultramax fleet for the third quarter of 2022 is expected to be approximately $14,921/day. 

Continuing Operations

Revenue. Revenue increased by $93.6 million, or approximately 52.5%, from $178.3 million for six months ended June 30, 2021 to $271.9 million for the six months ended June 30, 2022. The largest component of revenue is vessel revenue. Vessel revenue increased by $63.8 million, or approximately 35.9%, from $177.9 million for the six months ended June 30, 2021 to $241.7 million for the six months ended June 30, 2022. Vessel revenue increased due to improved market conditions in the drybulk business which was slightly offset by a reduction in short-term operating days. The second largest component of revenue is ship sale revenue which increased by $30.0 million, from $0 million for the six months ended June 30, 2021 to $30.0 million for the six months ended June 30, 2022, with the sale of a medium range tanker in the first half of 2022 (included in the Other segment under a bareboat charter) compared to no ship sales in continuing operations for the same period in 2021.

Drybulk Business Revenue and Vessel Revenue

In the drybulk business, our handysize total revenue and supramax/ultramax total revenue increased by $27.7 million and $36.5 million, respectively, or approximately 45.3% and 31.9%, respectively, from $61.1 million and $114.5 million, respectively, for the six months ended June 30, 2021 to $88.8 million and $151.0 million, respectively, for the six months ended June 30, 2022. The increase in the handysize and supramax/ultramax total revenue is due to a general strengthening of the spot market rates which was slightly offset by a reduction in short-term operating days.

Our handysize vessel revenue and supramax/ultramax vessel revenue increased by $27.8 million and $36.6 million, respectively, or approximately 45.7% and 32.0%, respectively, from $60.8 million and $114.4 million, respectively, for the six months ended June 30, 2021 to $88.6 million and $151.0 million, respectively, for the six months ended June 30, 2022 for the same reasons as set forth above.

Drybulk Business TCE Revenue

Handysize TCE per day increased by $9,705 per day, or approximately 63.5%, from $15,285 per day for the six months ended June 30, 2021 to $24,990 per day for the six months ended June 30, 2022. This increase was due to an increase in handysize spot market charter rates in the first half of 2022.

Supramax/ultramax TCE per day increased by $9,998 per day, or approximately 56.8%, from $17,606 per day for the six months ended June 30, 2021 to $27,604 per day for the six months ended June 30, 2022. This increase was due to an increase in supramax/ultramax spot market charter rates in the first half of 2022.

Cost of sales. Cost of sales increased by $36.5 million, or approximately 28.1%, from $130.1 million for the six months ended June 30, 2021 to $166.6 million for the six months ended June 30, 2022. Voyage expenses increased by $3.3 million from $43.1 million for the six months ended June 30, 2021 to $46.4 million for the six months ended June 30, 2022. This increase in voyage expenses was primarily due to an increase in fuel costs that was partially offset by a decrease in third party pool distributions and the number of short-term operating days. Charter hire expense increased by $1.4 million from $33.1 million for the six months ended June 30, 2021 to $34.5 million for the six months ended June 30, 2022. The increase in charter hire costs was primarily due to the strengthening of drybulk spot market rates for short-term charters in the first half of 2022 offset slightly by a reduction in the number of short-term charters. Cost of ship sales increased by $29.9 million from $0 million for the six months ended June 30, 2021 to $29.9 million for the six months ended June 30, 2022. The increase was primarily due to the cost of a medium range tanker sold in second quarter of 2022 compared to no ship sales in continuing operations for the same period in 2021.

Drybulk Business Cost of Sales

In the drybulk business, our handysize segment and supramax/ultramax segment cost of sales increased by $3.6 million and $3.2 million, respectively, or approximately 8.7% and 3.6%, from $41.6 million and $88.9 million, respectively, for the six months ended June 30, 2021 to $45.2 million and $92.1 million, respectively, for the six months ended June 30, 2022. The increase in the drybulk cost of sales for handysize segment was primarily due to increased voyage expenses, increased charter-in costs on short-term charters as drybulk spot charter rates strengthened during the first half of 2022 and increased depreciation due to a reversal of an impairment loss on ships in 2021 partially offset by a decrease in vessels operating costs. The increase in drybulk cost of sales for supramax/ultramax vessels was primarily due to voyage expenses and higher charter-in costs on short-term charters as spot rates strengthened during the first half of 2022 and higher vessel operating costs on a vessel resulting from an adjustment to an insurance claim provision.

Our handysize voyage expenses and supramax/ultramax voyage expenses increased by $0.8 million and $2.7 million, respectively, or approximately 5.7% and 9.4%, from $14.1 million and $28.8 million, respectively, for the six months ended June 30, 2021 to $14.9 million and $31.5 million, respectively, for the six months ended June 30, 2022. These increases were primarily due to an increase in fuel costs that was partially offset by a decrease in third party pool distributions and partially offset by a reduction in the number of short-term operating days. Our handysize vessel operating costs decreased from $15.2 million for the six months ended June 30, 2021, to $14.8 million for the six months ended June 30, 2022. The decrease in our handysize vessel operating costs was primarily due to a decrease in the purchase of spares and the cost to airfreight the spares to the vessels and a decrease in management fees on two vessels that were previously managed by an external company, which was slightly offset by an increase in insurance costs. Our supramax/ultramax vessel operating costs increased from $7.5 million for the six months ended June 30, 2021, to $8.7 million for the six months ended June 30, 2022. The increase in our supramax/ultramax vessel operating costs was primarily due to an increase in the number of owned supramax/ultramax vessels operating in the first half of 2022 following the purchase of a chartered-in vessel in September 2021.

Handysize vessel operating costs per day decreased by $141 per day from $5,602 per day for the six months ended June 30, 2021 to $5,461 per day for the six months ended June 30, 2022. These decreases were primarily due to a decrease in the purchase of spares and the cost to airfreight the spares to the vessels and a decrease in management fees on two vessels that were previously managed by an external company, slightly offset by an increase in insurance costs. Supramax/ultramax vessel operating costs per day increased by $126 per day from $5,212 per day for the six months ended June 30, 2021 to $5,338 per day for the six months ended June 30, 2022. These increases were primarily due to repair costs on a small number of vessels and increased insurance costs, slightly offset by the decrease in the purchase of spares and the cost to airfreight the spares to the vessels.

Gross profit. Gross profit increased by $57.1 million, or 118.5%, from $48.2 million for the six months ended June 30, 2021 to $105.3 million for the six months ended June 30, 2022 primarily for the same reasons set forth above.

Other operating income. Other operating income increased by $0.4 million, or 11.8%, from $3.4 million for the six months ended June 30, 2021 to $3.8 million for the six months ended June 30, 2022. We recorded the reversal of an impairment loss on vessels of $4.1 million for the six months ended June 30, 2022 compared to the reversal of an impairment loss on vessels of $3.6 million, the reversal of an impairment loss on right-of-use asset of $1.0 million, offset by an impairment loss on goodwill and intangibles of $1.0 million for the six months ended June 30, 2021. For the six months ended June 30, 2022, we incurred a net foreign exchange loss of $0.4 million compared to a net foreign exchange loss of $0.2 million for the six months ended June 30, 2021 as a result of unrealized revaluations of foreign currency bank balances, vendor balances and customer balances at period end as well as realized gains on settlement of intercompany and other balances.

Administrative expense. Administrative expense increased by $1.7 million, or approximately 12.0%, from $14.2 million for the six months ended June 30, 2021 to $15.9 million for the six months ended June 30, 2022 primarily due to increased staff incentive costs during the first half of 2022.

Interest income. Interest income increased from $0.1 million for the six months ended June 30, 2021 to $0.3 million for the six months ended June 30, 2022.

Interest expense. Interest expense increased from $7.1 million for the six months ended June 30, 2021 to $7.4 million for the six months ended June 30, 2022. The increase in interest expense was primarily due to the increase in LIBOR rates and the increase in facilities in the second half of 2021, partially offset by the repayment of the $35.8 million senior secured credit facility in May 2021 which incurred interest at a relatively higher rate.

Income tax (expense) benefit. Income tax (expense) benefit increased from a benefit of $0.1 million for the six months ended June 30, 2021 to an expense of $0.3 million for the six months ended June 30, 2022.

Profit for the period on continuing operations. Our profit for the six months ended June 30, 2022 increased to $85.8 million from $30.4 million for the six months ended June 30, 2021 primarily for the same reasons set forth above.

Continuing and Discontinued Operation

Profit for the period. Our profit for the six months ended June 30, 2022 increased to $85.8 million from $27.6 million for the six months ended June 30, 2021 primarily for the same reasons set forth above.

Liquidity and Capital Resources

Overview

We operate in a capital intensive industry. As of the date of this Report on Form 6-K, our primary short-term liquidity needs relate to working capital needs relating to voyages in progress, corporate overhead, drydock payments, payments of interest, quarterly principal payments under our credit facilities, any balloon payments on loans coming due in the next 12 months, the purchase of vessels by exercising purchase options and dividend payments, while our long-term liquidity needs are expected to primarily relate to drydock payments, instalment payments on new building construction contracts, purchasing new and second-hand vessels and final balloon payments relating to our credit facilities.

As of the date of this Report on Form 6-K, we have purchase options to acquire four vessels (excluding IVS Knot, IVS Kinglet, IVS Magpie and IVS Phoenix which have purchase options under their respective financing arrangements). We have options to purchase the IVS Naruo, the IVS Hayakita, the IVS Pebble Beach and the IVS Atsugi that have or are expected to first enter into the exercise periods under their respective charter parties in December 2020, September 2021, September 2022, and January 2023 respectively. The prices of these purchase options range from approximately $13.2 million to $25.2 million, subject to adjustments, where an option is exercisable on more than one date, based on the remaining time balance of the charter. In each case, such purchase option is subject to certain other adjustments and conditions and will expire at the completion of the applicable time charter.

We expect that we will rely upon cash from operations and external financing sources, including bank and other borrowings, to fund acquisitions and expansion and replacement capital expenditures. We cannot assure you that we will be able to secure adequate financing or obtain additional funds on favorable terms to meet our liquidity needs. We anticipate that our primary sources of funds for our short-term liquidity needs will be cash flows from operations, which includes proceeds from the sale of vessels, including planned and contracted sales, and borrowings. Generally, our long-term sources of funds will be from cash from operations, long-term borrowings and other debt or equity financings.

The shipping environment has been challenging and volatile over the last several years. The outbreak of COVID-19 from the beginning of 2020 and the actions taken to mitigate the spread of the virus initially resulted in a significant reduction in global economic activity and a decrease in the freight rates for drybulk vessels. In 2021, and continuing through to the first six months of 2022, we experienced a significant increase in demand for drybulk tonnage which, together with the reduced supply of new vessels into the market and increased port congestion, resulted in a strong spot market that favoured our operations. The increased earnings improved liquidity and strengthened our balance sheet and has provided us with sufficient free cash to pay dividends, repurchase shares, expand our fleet and to reduce our debt obligation.

We manage liquidity risk by monitoring forecast and actual cash flows and ensuring that adequate borrowing facilities are maintained. Our management may, from time to time, at their discretion raise or borrow monies for our requirements as they deem fit. There are measures in place to preserve cash, maintain adequate financing to meet our obligations and protect existing loan covenants imposed by the banks. The covenant levels are monitored continuously to identify any potential covenant issues so that solutions such as waivers or modifications to the loan covenants to obtain more favorable terms can be implemented in advance. We may seek to accomplish any of these independently or in conjunction with one or more of these actions. Based on the 12 months cash flow forecast prepared by management from the date of this Report on Form 6-K, our Board of Directors has no reason to believe that we will not continue as a going concern and has assessed that that there is no material uncertainty related to these conditions and there is no substantial doubt about our ability to continue as a going concern. We have plans in place to sell certain vessels, exercise certain purchase options, repay certain loans, protect existing covenants on term loans and maintain adequate liquidity.

Cash Flow Discussion

The following table presents cash flow information for each of the six months ended June 30, 2022 and 2021.

Net cash flows generated from operating activities. Net cash flows generated from operating activities improved by $35.7 million from $102.1 million for the six months ended June 30, 2021 to $137.8 million for the six months ended June 30, 2022. Operating cash flows before movement in working capital and ships increased by $58.0 million for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 due to an improved drybulk spot market. Cash flows from the movement in working capital decreased by $8.6 million in the six months ended June 30, 2022 as compared with the six months ended June 30, 2021. The net effect of capital expenditure on ships and proceeds on the sale of ships was an inflow of $28.4 million for the six months ended June 30, 2022 as compared with an inflow of $43.2 million for the six months ended June 30, 2021, a difference of $14.8 million. The amount generated on the sale of two medium range tankers and a small tanker was higher for the six months ended June 30, 2021 compared to one medium range tanker sold in the six months ended June 30, 2022.

Net cash (used in) generated from investing activities. Net cash (used in) generated from investing activities decreased by $0.3 million from an inflow of $0.2 million for the six months ended June 30, 2021, to an outflow of $0.1 million for the six months ended June 30, 2022.

Net cash flows used in financing activities. Net cash flows used in financing activities decreased by $0.7 million from $82.3 million for the six months ended June 30, 2021 to $81.6 million for the six months ended June 30, 2022. Net cash flows used in financing activities for the six months ended June 30, 2022 was primarily the result of the repayment of long-term interest bearing debt of $38.3 million, principal repayments on lease liabilities of $20.7 million and dividend payments of $22.6 million. Net cash flows used in financing activities for the six months ended June 30, 2021 was primarily the result of the repayment of long-term interest bearing debt of $67.6 million and principal repayments on lease liabilities of $17.8 million, offset by a decrease of $3.4 million in restricted cash.

Restricted cash. The above cash flow figures in this “Cash Flow Discussion” are after deducting restricted cash of $9.7 million which is pledged to certain banks to secure loans and other credit facilities. As of June 30, 2022, we had cash and cash equivalents (excluding restricted cash) of $160.0 million.

Capital Expenditures

We make capital expenditures from time to time in connection with drydocking activities and maintenance in the ordinary course and in order to comply with environmental and other governmental regulations and in connection with our vessel acquisitions. We may in the future enter into newbuilding contracts or contracts to acquire newbuildings, or resale contracts, or to acquire second hand vessels.

In addition to acquisitions that we may undertake in future periods, we will incur additional expenditures due to drydockings for our fleet. The location of the drydock will be decided when the vessel is scheduled to drydock. We estimate our drydocking costs, including capitalized costs incurred during drydocking relating to vessels and vessel equipment, and scheduled off-hire days for our fleet for the second half of 2022 through 2023 to be:

Actual costs will vary based on various factors, including where the drydockings are actually performed. We expect to fund these costs with cash from operations. These costs do not include drydock expense items that are reflected in vessel operating costs or costs associated with the installation of ballast water treatment systems.

Actual length of drydocking will vary based on the condition of the vessel, yard schedules and other factors. Higher repairs and maintenance expenses during drydocking for vessels which are over 15 years old typically result in a higher number of off-hire days depending on the condition of the vessel.

For the six months ended June 30, 2022 and 2021, we incurred a total of $1.0 million and $3.6 million of drydocking costs, respectively, excluding costs incurred during drydocking that were capitalized to vessel assets or vessel equipment.

During the first half of 2022, one of our vessels completed its scheduled drydocking. We estimate that nine of our vessels will be drydocked during the second half of 2022.

Loan Covenants 

On June 28, 2019, the parties to the relevant agreements entered into amendments to our $100.0 million senior secured credit facility, the purpose of which was to lower the amount of the minimum book value net worth covenant, introduce a new working capital covenant and clarify, for purposes of calculating financial covenants, the treatment of assets and liabilities that has been reflected in our financial statements from January 1, 2019 as a consequence of the adoption of IFRS 16. On April 16, 2020, the parties to the relevant agreements entered into amendments to our $100.0 million senior secured credit facility the purpose of which was to amend the definitions of consolidated current assets and consolidated current liabilities for purposes of the working capital covenant described below, in each case such that the determination of the consolidated current assets and consolidated current liabilities of Grindrod Shipping excludes any adjustments made for IFRS 16. On December 29, 2020 and December 31, 2020, the parties to the relevant agreements entered into further amendments to our $114.1 million senior secured credit facility and our $100.0 million senior secured credit facility, respectively, in which the Lenders agreed to the following covenant amendments:

On December 29, 2020 and June 7, 2021 the parties to the relevant agreements entered into further amendments to our $114.1 million senior secured credit facility and our $100.0 million senior secured credit facility, respectively, in which the Lenders agreed to the following covenant amendments:

On September 10, 2021, the parties to the relevant agreements entered into an amendment and restatement agreement to our $114.1 million senior secured credit facility to increase the amount of the facility and as the IVS Bulk group was 100% owned by the Group, to remove the financial covenant requirement for the consolidated group of IVS Bulk and its subsidiaries.

The $114.1 million senior secured credit facility, and the $100.0 million senior secured credit facility described in the unaudited interim condensed consolidated financial statements below, contain among other conditions and obligations, the following amended financial covenants the most stringent of which require us and our subsidiaries, to maintain on a consolidated basis:

Further, the credit facilities contain provisions requiring a minimum value of the collateral for each relevant facility, such that the aggregate fair market value of the vessels securing the relevant facility plus any additional security securing that facility divided by the relevant debt amount results in at least a specified minimum amount (depending on the relevant facility agreement and the type and age of the vessels securing the loan), with the relevant minimum amount ranging between 125% and 143%. If any of the relevant thresholds is not met, the relevant party to the agreement may be required to prepay a portion of the relevant loan or provide additional collateral security to eliminate the shortfall.

The credit facilities also contain, among other conditions, restrictive covenants which could or would restrict our ability, amongst other restrictions, to:

A violation of any of the financial or restrictive covenants, or various other provisions, contained in the credit facilities described above and under “—Off-Balance Sheet Arrangements” below may constitute an event of default under the relevant credit facility, which, unless cured (if permitted, and capable of being cured), or waived or modified by the relevant banks, provides those banks with the right to, among other things (and as the case may be), require the relevant borrowers or other obligors to post additional collateral, enhance their equity and liquidity, increase the interest payable, pay down the relevant indebtedness to a level where compliance with relevant loan covenants are met, sell vessels, reclassify indebtedness as current liabilities, accelerate indebtedness, enforce security on fleet vessels and the other assets securing the credit facilities, and make demand under guarantees, which would impair our ability to continue to conduct our business.

Furthermore, the credit facilities contain cross-default provisions. A cross-default provision in one facility means that an event of default under one or more other facilities could, subject to any applicable thresholds, result in an event of default occurring under the first facility. Because of the presence of cross-default provisions in the facilities, the refusal of the lenders under any credit facilities to grant or extend a waiver could result in certain indebtedness being accelerated, even if the other lenders under the other credit facilities have waived defaults under their respective credit facilities. If any of our secured indebtedness is accelerated in full or in part, it could be difficult in the current financing environment for us to refinance the relevant debt or obtain additional financing in such circumstances and we could lose vessels and other assets securing the credit facilities if the lenders foreclose their security, which would adversely affect our ability to conduct our business.

Moreover, in connection with any waivers of or amendments to the credit facilities that have been obtained, or may be obtained in the future, the banks may impose additional operating and financial restrictions or modify the terms of the existing credit facilities. These restrictions may further restrict our ability to, among other things, pay dividends, make capital expenditures or incur additional indebtedness, including through the issuance of guarantees. In addition, the banks may require the payment of additional fees, require prepayment of a portion of the indebtedness owed to them, accelerate the amortization schedule for facility indebtedness and increase the interest rates charged on outstanding indebtedness.

As of June 30, 2022, Grindrod Shipping, GSPL, the borrowers and the other GSPL subsidiaries were in compliance with all of the financial and restrictive covenants contained in our credit facilities.

Trend Information

Our results of operations depend primarily on the charter hire rates that we are able to realize for our vessels, which depend on demand and supply dynamics characterizing the drybulk and tanker markets at any given time. For other trends affecting our business, please see other discussions under “—Factors Affecting our Results of Operations and Financial Condition” above.

Off Balance Sheet Arrangements 

Charter Hire Obligations

We are committed to make certain charter hire payments to third parties for chartered-in vessels. IFRS 16 requires us to recognize, on a discounted basis, the rights and obligations created by the commitment to lease assets on the balance sheet, unless the term of the lease is less than 12 months or of low value. Please see “—Contractual Obligations and Contingencies” below for these and our other contractual obligations and commitments.

Contractual Obligations and Contingencies

Our contractual obligations and commercial commitments consist primarily of secured bank loans and other borrowings and interest thereon, lease liabilities and time charter agreements and capital expenditure on vessels, as described below.

The following table summarizes our contractual obligations on the balance sheet as of June 30, 2022:

Recent Accounting Pronouncements

During the six month period ended June 30, 2022, we adopted new IFRSs and amendments to IFRSs issued by the IASB that are mandatorily effective for an accounting period that begins on or after January 1, 2022. The adoption of these new and revised IFRSs has not resulted in significant changes to our accounting policies and has no material effect on the amounts reported for the current or prior periods. 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes from the market risk disclosure set forth in the section entitled “Quantitative and Qualitative Disclosures about Market Risk” in the Company’s Annual Report on Form 20-F for the year ended December 31, 2021, filed with the SEC on March 25, 2022.

Spot Market Rate Risk

We currently employ our vessels primarily in the spot market or spot market-oriented pools and do not have a significant amount of fixed revenue cover and we are therefore exposed to the cyclicality and volatility of the spot market. Spot market charter rates may fluctuate significantly based upon the supply of and demand for seaborne shipping capacity.

Interest Rate Risk

Borrowings under our credit facilities generally bear interest at rates based on a premium over LIBOR. Therefore, we are exposed to the risk that our interest expense may increase if interest rates rise. We currently do not have any interest rate swaps in place. We may, in the future use interest rate swaps to reduce our exposure to market risk from changes in interest rates. The principal objective of these contracts is to minimize the risks and costs associated with our variable-rate debt and are not for speculative or trading purposes.

For the six months ended June 30, 2022 and 2021, we paid interest on our outstanding debt at a weighted average interest rate of 5.16% and 3.72% respectively. A 0.5% increase or decrease in LIBOR would have increased or decreased our interest expense six months ended June 30, 2022 and 2021, by $0.5 million and $0.5 million, respectively.

Foreign Exchange Rate Risk

Our primary economic environment is the international shipping market. This market utilizes the U.S. dollar as its functional currency. Consequently, virtually all of our revenue and expenses are in U.S. dollars. Transactions in currencies other than the functional currency are translated at the exchange rate on the transaction date and the relevant payment is translated on the payment date, with the difference being reported in the income statement as an exchange gain or loss. Assets and liabilities denominated in currencies different from the functional currency are translated into the functional currency for the preparation of the statement of financial position at the exchange rate prevailing on the statement of financial position date. Differences in exchange rates between statement of financial position dates may lead to gains or losses being reported in the income statement. Extraordinary transactions and the translation of the financial statements of the subsidiaries whose functional currencies are not the U.S. dollar for purposes of preparing our unaudited interim condensed consolidated financial statements, may follow different translation procedures. Depreciation in the value of the U.S. dollar relative to other currencies will increase the U.S. dollar cost of us paying expenses denominated in such other currencies. The portion of our business conducted in other currencies could increase in the future, which could expand our exposure to losses arising from currency fluctuations.

There is a risk that currency fluctuations will have a negative effect on our cash flows. As of the date of this Report on Form 6-K, we have not entered into any hedging contracts to protect against currency fluctuations. We may seek to hedge this currency fluctuation risk in the future.

The following sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the respective period end for a 10% change in foreign currency rates. If the relevant foreign currency strengthens by 10% against our functional currency, relative to the exchange rate that we used to prepare the respective financial statements, profit or loss will increase/(decrease) by:

Freight Derivatives Risk

From time to time, we may take positions in freight derivatives, mainly forward freight agreements, or FFAs. Generally, freight derivatives may be used to hedge exposure to charter rate market risk through the purchase or sale of specified time charter rates for forward positions. Settlement of FFAs is in cash, against a daily market index published by the Baltic Exchange. By taking positions in FFAs or other derivative instruments we could suffer losses in the settling or termination of these agreements. As of June 30, 2022, we had 18 FFAs outstanding. For the six months ended June 30, 2022, we recorded a net profit on FFAs of $4.0 million in our unaudited interim condensed consolidated financial statements, which resulted from fair value profit. For the six months ended June 30, 2021, we recorded a net profit on FFAs of $0.4 million on FFAs in our unaudited interim condensed consolidated financial statements.

Bunker Price Risk

Our operating results are affected by movement in the price of fuel consumed by the vessels—known in the industry as bunkers. The price and supply of fuel is unpredictable and fluctuates based on events outside our control, including changes in legislation such as the IMO 2020 regulations, geopolitical developments, supply of and demand for oil and gas, actions by OPEC and other oil and gas producers, war and unrest in oil producing countries and regions, regional production patterns and environmental concerns. Further, fuel may become much more expensive in the future, which may reduce our profitability. We do hedge some of our exposure to bunker price risk from time to time.

For the six months ended June 30, 2022 and 2021, we recorded a net gain of $2.4 million and $1.2 million on bunker swaps, respectively, in our unaudited interim condensed consolidated financial statements, which resulted from fair value gain.

A 10% increase or decrease in the bunker price, would result in a decrease or increase of the hedging reserve for the six months ended June 30, 2022 and 2021, by $0.6 million and $0.6 million, respectively.

Concentration of Credit Risk

Financial instruments, which potentially subject us to significant concentrations of credit risk, consist principally of trade accounts receivable and bank balances. We closely monitor our exposure to customers for credit risk. We have policies in place to ensure that we trade with customers with an appropriate credit history. We do not take out credit default insurance.

Our maximum exposure to credit risk in the event that counterparties fail to perform their obligations as at the end of each financial year in relation to each class of recognized financial assets is the carrying amount of those assets as indicated in our statement of financial position.

Inflation

With inflation becoming a significant factor in the global economy, inflationary pressures are expected to result in increased operating, voyage (including bunkers) and general and administrative costs.

UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

GRINDROD SHIPPING HOLDINGS LTD.

INDEX TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

GRINDROD SHIPPING HOLDINGS LTD.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statements

GRINDROD SHIPPING HOLDINGS LTD.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

The accompanying notes are an integral part of the unaudited interim condensed consolidated financial statement

GRINDROD SHIPPING HOLDINGS LTD.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

GRINDROD SHIPPING HOLDINGS LTD.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (cont'd)