Grindrod Shipping Holdings Ltd (GRIN) 2021 Q1 法說會逐字稿

Thank you for standing by, ladies and gentlemen, and welcome to the Grindrod Shipping Holdings Ltd. Conference Call on the First, Second Quarter and First Half 2021 Financial Results. We have with us Mr. Martyn Wade, Chief Executive Officer; and Mr. Stephen Griffiths, Chief Financial Officer of the company. (Operator Instructions) I must advise you that this conference is being recorded today.

We now pass the floor to one of your speakers today, Mr. Wade. Please go ahead.

Thank you, operator. Welcome, everyone, and thank you for joining on our call for the first quarter, second quarter and first half of 2021. Let me please refer you to Slide #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 drybulk and tanker 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 today'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 to the most directly comparable GAAP measures, please see yesterday's press release and Pages 24 and 25 of the slide deck, which is posted on our website and our filings with the SEC.

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 to the most directly comparable GAAP measures. Please see yesterday's press release and Pages 24 and 25 of the slide deck, which is posted on our website and our filings with the SEC.

Please turn to Slide 4, the first quarter, second quarter and first half of 2021 financial highlights. Financial results for the second quarter of 2021 increased compared to the previous year due to favorable market conditions. Gross profit increased to $34.3 million in the second quarter of 2021 for $1.8 million in the second quarter of 2020, while adjusted EBITDA in the second quarter of 2021 increased to $40.7 million compared to $9.2 million from the previous year.

Net profit attributable to owners of the company increased to $19.8 million in the second quarter of 2021 from a loss of $11.8 million in the second quarter of 2020. While profit per share, EPS, was $1.02 in the second quarter of 2021 compared to a loss per share of $0.62 in the previous year. For the first half, gross profit was $48.2 million. Adjusted EBITDA was $62.5 million. Our net profit attributable to owners of the company was $22.1 million. Finally, profit per share was $1.15 in the first half of 2021.

Can we please now turn to Slide 5 to look at operational highlights in the second quarter of the year. We sold the 2009-built small products tanker, the Breede, for a gross price of $6.8 million with delivery to the buyers on April 14, 2021. We also sold the 2013-built medium-range tankers, Leopard Moon and Leopard Sun, for a total gross price of $42.8 million with deliveries to the buyers on April 12 and April 20 this year.

On May 7 this year, the United Kingdom Upper Tribunal found in our favor with respect to a previously disclosed tax dispute with Her Majesty's Revenue and Customs, HMRC. HMRC decided not to appeal the decision, which prompted the release of $2.4 million in tax provisions that had been recorded in respect of such dispute in prior periods.

On the 9th (sic) [19th] of May, we repaid the approximate $25.8 million remaining outstanding amounts on the senior secured credit facility with an affiliate of Bain Capital Credit. On June 28, 2021, we announced our transition to a quarterly financial reporting from semi-annual reporting. During the second quarter, we also purchased a combination -- a combined total of 38,467 (sic) [33,467] ordinary shares in the open market on the NASDAQ and the JSE at an average price of $8.46 per share.

Now can we please turn to Slide 6 to discuss recent developments. On July 21, the group entered into an agreement to acquire the remainder of IVS Bulk held by Bain for a total consideration of $46.3 million, comprising of $37.2 million for the ordinary equity shares and $9.1 million for the preference shares. The purchase price was based on appraised values as at May 13, 2021, and the IVS Bulk balance sheet as of April 30, 2021. The agreement with Bain is subject to customary closing conditions with closing to occur no later than September 30, 2021.

On the 17th of August, Grindrod Shipping entered into an agreement to purchase the 2019 Japanese-built Ultramax bulk carrier, IVS Phoenix, which we currently charter-in from its owners for a price of $23.5 million, which we believe reflects a significantly reduced price relative to management's estimate of the fair market value of the vessel due to the early termination of the prevailing charter agreement.

In order to finance the acquisition, we have simultaneously entered into a financing arrangement with separate Japanese owners on attractive terms for a gross amount of $25 million, whereby the company will bareboat charter the vessel back for a period of up to 15 years and has the right, but not the obligation, to acquire the vessel after the first 2 years of the charter. Transactions are expected to close by the end of September 2021, while the vessel will remain chartered-in on the original terms until closing.

Now can we please turn to Slide 7, where we will go over our new dividend and capital return policy. Commencing from the quarter ending September 30, the company intends, subject to operating needs and other circumstances, to return approximately 30% of its adjusted net income. This will be adjusted for extraordinary items to shareholders through a combination of quarterly dividends and/or share repurchases. The company intends to pay a minimum quarterly base dividend of USD 0.03 per share and an additional variable component that will consist of additional dividends and/or share repurchases.

The timing and amounts of dividend payments will be determined by our Board of Directors and could be affected by various factors, including our financial results and earnings restrictions in our debt agreements, required capital expenditures and the provision of Singapore law affecting the payment of dividend to shareholders and other factors. I would like to reiterate that our key policy focus is to create a simple, transparent, sustainable capital return policy that allows the company to retain significant cash flow to further strengthen the balance sheet and pursue growth while rewarding shareholders with material dividends and/or share repurchases in times of market strength.

Now I'll pass the floor over to Steve Griffiths, our Chief Financial Officer, who will go over the financial highlights and performance for the second quarter of 2021. Steve?

Thank you, Martyn. Focusing on some key metrics for the second quarter compared to the first quarter. Gross profit increased to $34.3 million for the 3 months ended June 30, 2021. And from $13.8 million for the 3 months ended March 31, 2021. Profit attributable to owners of the company for the 3 months ended June 30, 2021, increased to $19.8 million or $1.02 per share from $2.4 million or $0.12 per share for the 3 months ended March 31, 2021.

Now looking into the first half figures. Gross profit was $48.2 million for the 6 months ended June 30, 2021, while profit attributable to owners of the company for the 6 months ended June 30, 2021, was $22.1 million or $1.15 per share.

We are now turning to Slide 10. The company was able to materially enhance our cash and liquidity during the first half, while simultaneously repaying over $66 million debt. With net debt reduced to $144 million as of June 30, 2021, we believe the company is well positioned to pursue its expected growth and capital return strategies.

On Slide 11. The company spent considerable effort over the last 12 months to refinance or redeem all of our upcoming maturities partly through the timely sales of our tankers. Now the limited debt maturities until 2025 combined with a conservative amortization profile provide the company with balance sheet flexibility going forward.

Let's turn to Slide 12. We will now briefly discuss results in the drybulk business for the second quarter of 2021. In the drybulk business, Handysize TCE per day was $18,104 per day for the 3 months ended June 30, 2021, and $5,852 per day for the same period in 2020. Supramax/Ultramax TCE per day was $21,916 per day for the 3 months ended June 30, 2021, compared to $7,676 per day for the same period in 2020. As of August 16, 2021, we have contracted approximately 1,326 operating days at an average TCE of $25,205 per day for our handysizes and approximately 1,686 operating days at an average TCE of $30,666 per day for our Supramaxes. The average long-term charter-in cost per day for the Supramax/Ultramax fleet for the second half of 2021 is expected to be approximately $12,883 per day. The slide also provides figures for Q1 and the first half of 2021.

Now turning to Slide 13. The scale of the rise in the drybulk freight rates thus far in 2021 is easily demonstrated versus our historical results. During the first half, approximately 90% of our fleet was predominantly trading either on index-linked cargo contracts, short-term time chart -- short-term time charters or in the spot market, leaving the company exceptionally well positioned to take advantage of the strong freight rate environment. Every $1,000 change in TCE per day equated to $5.4 million of TCE revenue during half 1 2021, and that's for the core fleet.

Now turning to Slide 14. This slide shows the owned fleet cash breakeven analysis for the first half of 2021. Long-term charter-in breakeven was $13,850 per vessel per day and core drybulk breakeven was $11,630 per vessel per day. The cash breakeven rate per day includes operational expenses, net G&A, interest expense and debt repayment.

With that, I would like to turn the call back over to Martyn.

Thanks, Steve. Now please, can I ask you to turn to Slide 16? Let's look at the fundamentals of the drybulk sector and how they have been developing against the new market environment. The drybulk cargoes hit hardest by the global pandemic were coal and minor bulk demand, while iron ore and grains were far more resilient. Thus far in 2021, we have seen a material rebound in coal and minor bulk demand, which is closely correlated to global GDP. Pent-up demand has led to a more robust recovery in 2021 in both raw trade figures and shipping demand, i.e., tonne-miles. Handysizes and Supramaxes have been further helped by congestion in the container shipping business, which is leading to certain bagged cargoes and break bulk like scrap and steel returning to bulk carriers.

Now can we turn to Slide 17? As the slide depicts, iron ore trade rebounded faster than expected from early 2020. Declines with healthy demand continuing in 2021. Coal trade has exceeded expectations, but still remains below 2019 levels. Grain flows remained healthy in 2021 after a very strong 2020. Looking at the minor bulks, which are a key business segment for Grindrod Shipping, the demand has rebounded strongly, driven partly by the steel, forestry and by forestry I mean logs, cement, nickel ore and alumina trades.

Now to Slide 18. The chart on the left indicates Handysize/Supramax TC rates have steadily increased over the course of 2021, reaching levels last seen in 2008. Asset prices have also rebounded since the lows of late 2020, but remain below levels reached in 2010 despite higher comparative charter rates.

Turning to Slide 19. The drybulk order book continues to shrink to multi-decade lows and is estimated only 6% of the current fleet. Handysize and Supramax order books are the smallest in the drybulk fleet at 4.7% and 5.8%, respectively. 20% of the drybulk fleet is 15 years or older, or 10% of the drybulk fleet is 20 years or older. Despite strong market conditions, new ordering remains constrained by uncertainty relating to engine technology and emissions.

Finally, let's turn to Slide 21 for our conclusions and strategy. Let's start with our achievements at the beginning of 2021. The strong drybulk market conditions led to our highest financial result since our spin-off and listing with the sale of all our remaining spot trading product tankers that has allowed us to focus on drybulk at an optimal time. Accordingly, we announced an agreement to acquire the remainder of IVS Bulk at an attractive valuation.

On the commercial side, the dynamic approach of the company that includes opportunistically chartering of vessels on both long and short-time charters in order to service our cargo contracts is bearing significant fruit. Our long-term charter-in vessels contracted what we believe to be well below current market charter rates and most contain favorable extension options and/or fixed price purchase options that are now notably below the current market value.

This allows us the option to pursue growth at prices considerably below prevailing levels in the secondhand and charter markets as evidenced in our announcement of the IVS Bulk -- IVS Phoenix acquisition, sorry. In addition, we have been able to complement our core fleet with a number of short-term charter-in vessels which we hold a series of charter extension options at commercially favorable levels. Together with our own fleet, predominantly Japanese-built vessels, these options demonstrate the flexibility of our operating model.

On the corporate side, having concluded a series of strategic and transformational transactions, we have announced our transition to a quarterly financial reporting. In addition, we are pleased to reward our shareholders with the initiation of a quarterly dividend and capital return policy beginning with the third quarter.

Now looking ahead. Drybulk freight rates have continued to increase to levels last achieved before the 2008 financial crisis. Freight rates have been supported by rebounding commodity demand and pricing in 2021 across a wide swathe of commodities, including grains, iron ore, coal and minor bulks. While we are seeing the smallest newbuilding order book in decades supporting market recovery due to construction in vessel supply growth as demand continues to recover.

Due to record amounts of new containership orders thus far in 2021, even if drybulk orders were to pick up materially, limited shipyard capacity means that most new orders could not hit the water in 2024 at the earliest. To the extent that demand continues to grow moderately, the lack of available supply growth leads to an attractive potential multiyear window for the drybulk market. In this environment with stronger market fundamentals, we are confident that Grindrod Shipping can reinforce its market position and create significant value for our shareholders.

With this, I thank you all for joining our call today and looking forward to reporting further progress on Grindrod Shipping. With that, we'd like to open up for questions. Operator?

(Operator Instructions) We will now take our first question.

Randy Giveans from Jefferies. A long-time listener, first-time caller. You mentioned on one of the slides that you have 1,326 days booked at a little above $25,000 for the handy, about 1,700 days bulk above $30,000 for the supras. I guess 2 questions. Are all those days entirely 3Q or do some slip into 4Q? And then should we expect the same number of operating days in 3Q '21 compared to 2Q '21? I'm trying to break that down to a percentage of 3Q.

Yes. Randy, I'll take this. Steve, here. So first, your first question, yes, that's the cover that we have for Q3 only. And then -- yes, I think the expectation is for our total days, including the short-term operating to be pretty much the same as what we had in Q2.

Okay. So I guess that works out to around 80% of handys and [69%] supras. Okay.

Yes.

And then any coverage into 4Q '21 or into 2022 with some longer-term time charters at these levels?

Not at the moment. We are, to be honest, as you and I had a discussion some weeks ago, we are running spot to the market. We will be looking forward. But at the moment, we're happy to take the market. And it is something we will concentrate on. With levels still moving up, we feel that Q3 into Q4 is developing very nicely. We're not convinced there will be a Chinese New Year again. So we suspect that the market maybe will ease a bit, but we think it's going to be continuing strong. So yes, we will be taking some cover, limited cover at some point. But at the moment, we're very happy to run spot to the market.

Perfect. And then last question for me. We talked about it, like you said a few weeks ago in terms of dividends. I see here your dividend policy kind of has a base level of $0.03, 30% net income for additional payouts. I guess 2 questions. How did you kind of come up with that 30% number instead of 10% or 60% or any other number?

And then second question. How do you determine the split between dividends and share repurchases? Is it based on a NAV calculation or liquidity? So you can kind of touch on those 2 components of the dividend policy.

Martyn, do you want me...

Steve, (inaudible) part of it. I'll take the other part. Yes.

Yes. So the split between dividends and share buybacks is obviously, if our share price is trading at close to NAV, then there's no need for us to do any share buybacks. And then obviously, the whole portion will be allocated against -- will be allocated against the dividend. In terms of coming up with that 30%, Martyn, you happy for me to take this or...

Yes, 100%.

Yes. In terms of the 30%, I mean we -- the allocation of cash, I mean, there's a whole lot of items that go into allocation of cash. But initially, we're looking to strengthen our balance sheet and improve liquidity. Obviously, there's -- we're well underway with that because of the recent strong earnings. And then we're looking to return cash value to the shareholders by way of dividends and/or share buybacks as per this policy. But then in the future, we need to keep something aside to grow.

We'll be looking to exercise some of our purchase options on the long-term chartered fleet, not all at once, but over time as cash becomes available, and then paying down some debt. At the moment, we had about 46% leverage against our fleet. And I guess we'd like to be a bit lower. So yes, all of those things taken into account, we just thought that the 30% was a sweet spot for us.

And obviously, Randy, can I just add? As this market develops and it keeps on going, I mean, as the cash gets generated, obviously, we can be flexible again. But I think it is conservative for the first time in many, many years, I'll say all our peers are generating cash, it has to be kind of bulletproof balance sheet and then move forward from there. It's a very -- it's a great position to be in. As Steve said, for years, he was wondering where the cash is coming from. Now he's wondering what to do with it. So it's exciting times.

Yes, clearly, especially with this forward bookings for the third quarter, it seems like your net income will be substantially higher than 2Q plus your payout, either return of capital or dividend or share repurchases will be pretty robust there. So we'll be looking forward to that 3Q release. Keep up the great work.

We will now take our next question.

Can you hear me, Martyn and Steve?

Yes.

Yes. Okay. Sorry, it's a little odd the way the moderator is doing this. But yes, it's Poe Fratt from NOBLE Capital Markets. Just a couple of questions. Martyn, first of all, can you just talk about the macro environment? And you just said that you expect some easing seasonally, but can you just sort of give us a little more color on if there's anything that concerns you right now as far as the state of the drybulk market, what would be the surprise? Would it be China really clamping down on, say, steel production that ripples through the market? Or what are you concerned about as you look towards the end of the year and into 2022?

It's a good question. I actually got our Chairman asked me at Board yesterday, what can possibly go wrong? And you never want to attempt it. It's the beauty of shipping. [Obviously] no. It's interesting what's going on in China, actually, from a COVID perspective at the moment. And we heard reports today that on the Yangtze River, which when you think about 22% of the world's fleet trades coastal in China, they're talking about all river pilots having to do compulsory quarantine, the congestion, it is staggering how much congestion with another figure about 7% of the world's handys are basically tied up in congestion in China. That's all very positive.

On the steel industry, yes, it might slow down. Although demand in the world is such and in fact was very positive for the first time since the 2000s is that, well, steel production outside of China is at record levels. So demand is there. So when we actually looked at all the Q2 commodity figures, what was very pleasing was that, well, it has rebounded. A lot of it still hasn't reached 2019 levels. So despite it's very healthy, despite you'd expected gangbusters for every commodity, shippings change. With ships steaming a lot longer, crossing oceans, and it's all feeding in along with the container side to very positive.

And then I caution end of the year, I mean, the FFAs Supramax is what 23%, 24% for Q1 against Q4 at 33%. Traditionally, it comes off. But as I think as we found this year, can we realistically expect China to allow 100 million people to go home. So our feeling is it might be a little stronger, but we're kind of taking quarter-by-quarter. And demand is there, and there's nothing in the figures at the moment that suggests anything it's going to end anytime soon. And overall, with an order book, the lowest in many decades, that's always positive. If the order book's only started picking up, then we always know what happens next, but that could be years away now. So all in all, I think it's quite the optimistic.

Great. Yes, when you look at the order book, that may temper any potential seasonality or other factors that hit the market. When -- can you talk about -- in your -- in a recent presentation, you talked about how you thought the FFA market wasn't properly discounting what potentially could happen in 2022. And it sounded like you might be buying FFAs for 2022. And can you just clarify that statement? And if it's true, if you could give us an order of magnitude of what kind of commitments you might have made for 2022?

Very, very little. We only use FFAs, if we feel the need to hedge at any point. We don't at the moment. We have bought a couple because we have index-linked contracts that one in particular could actually switch to a fixed rate. The people counterparties have the option to change it to a fixed rate. So all we've gone and done is brought a very small amount of kind of the 22% paper at a level below what the fixed is just to hedge ourselves in that respect. But otherwise, no, we feel, yes, that paper is still undervalued. But our ships are our core fleet is a lot less than that. And with the options we have on a lot of our chartered ships, we're very happy. So if we do any paper, it is purely specifically to hedge a particular piece of business. So at the moment, no, no, we're not heavily involved in the paper. We prefer to trade the physical.

Okay. And then you talked about the purchase options and I was a little bit surprised because the Phoenix wasn't one that you had a purchase option, yet you were able to acquire it. And can you give us an idea of how that came about? And then secondly, you talked about a discount to what potentially you think it's worth right now? And can you quantify that discount? Or would you be willing to quantify that discount?

Sorry, Steve. This is where the yard that own ships in Japan. And we've had a relationship for well over 10 years, taken a number of their ships on. And this was basically flagship we took a number of several years ago. And what happened is that the yard has now consolidated with another yard, and they're getting out of ship-owning. So they came to us, and this was really the only ship they had going on into the future because obviously we had a fixed period then with options, and they asked whether we'd like to buy the ship or could they sell it to another owner and we maintain the charter.

And we looked at it, and obviously, there was value in the existing charter. So we came to a very amicable arrangement with them that this discount the -- what we could have made would have been making on the charter not as much as maybe we would have liked, but then it is relationships with our Japanese friends, and they agreed to sell us the ship at a price.

How you compare that to the market these days? Well, all I can say is a new building of this ship type in Japan for delivery 2024 is $35 million. So we're now talking a 2-year-old ship, it's $32 million, $33 million conservatively, the value. So it's a pretty crackerjack deal. We've got a great price. We maintain our cost base of the charter. And as we said, we have the right if we wanted to buy it back after 2 years.

So I think it's a win-win where we have an ultra-modern ship in our fleet at a very, very competitive price, and we'll be generating a lot of cash out of it. So it is a good deal. And a lot of it is to do with the relationships power, and it's the trust here. You get to this position. You never renege on anything. And then when things change, they come and ask you, they'd like a favor. We said, yes, that's a price, and it was agreed.

Great. That's helpful. And then -- I'm sorry, Steve, did you want to add something or...

Yes. No, no. Just to add to what Martyn said, there's been a bit of confusion about buying the ship at $23.5 million and getting financed at $25 million. But obviously, with the vessel value that as what Martyn says, $31 million to $32 million, we secured the financing -- the Japanese financing similar to what we've done on some of our other vessels, the Knot, Kinglet, Magpie and Matuku. So that's $25 million loan against the valuation of $31 million, $32 million.

Great. And I asked about the purchase options because you have one without a purchase option that's on charter that's coming up next year, the Crimson charter. Is that potentially something to watch as far as maybe a similar transaction? And then if you could discuss the actual options that you have on like the Pinehurst that comes up next year, how should we be looking at those options? And are the purchase options on the 5 that you have on the chartered-in capacity? Are those set or are those market based or subject to negotiation?

Well, the Crimson Creek, we don't have a purchase option on with our friends from Marubeni. But we've had around now for 6, 7 years, and we keep on extending as to whether we would want to buy. I'm sure Marubeni would love to sell it to us at a price. We probably won't be able to afford it, to be honest. So that is a charter.

On our other ones, we have a number of ships where we've been able to declare the purchase options for the last couple of years. One of them is at fixed price. That's the Pinehurst. And the other one is the IVS Naruo, which is a mixture of dollar and yen, and that depreciates every year. So at the moment, obviously, the charter is very attractive. We're doing very well there, but we will hold that option.

Again, it's another owner (inaudible), we know incredibly well. We're discussing with him. And at some point, we will be able to declare that option and either flip her or take her back into the fleet. So -- and there'll be another couple where we have the options next year, and it's just a matter of looking at it and gauging when is the right time to declare the option.

We have a number of older handys. We have 5 older handys. It's going to be at some point, we could be selling them and then renewing from those proceeds with some of these purchase options. It's a great position to be in, and we're just going to monitor the market and decide when the timing is right. But at the moment, it's a nice option to have, and it does sit there and with a lot of value in.

Understood. And frankly, it's -- you have more -- looking back a year to 18 months ago, you had a lot of visible growth that was pretty -- you had a little more control over whether it's the JV interest. You're sort of at the end of that road. Now you have the purchase options on the chartered-in vessels. Are you looking beyond those, Martyn, at this point in time? And how would you characterize the S&P market right now?

Well, I think starting with the S&P market, I still think it's undervalued. When you -- if you take a 1-year rate on an Ultramax, which is probably not 1 million miles of 30,000 with 2-year rate is in the mid-20s and the cash-generating properties. I think the S&P market, I think it has a capability of at least another 50% to go with how much cash, which is why all our friends in Greece are being so aggressive and 1 or 2 friends in London.

That's interesting. For us, it's interesting because, as usual, we're shipping, no one knows how long it's going to last. This is set. You never want to chase the market, but we could be opportune. But with the amount of purchase options we have, they're very nice where you're declaring options at many, many millions below the market. So immediately improving the age of your fleet, the quality of your fleet with cheap ships.

But -- it's -- yes, it's as usual, we're shipping. I mean values have gone a long way quickly. We don't want to chase it. There is still value there. With this kind of cash being generated, we will assess what the use of funds is for, but it is a good position to be. And yes, we have an open mind. I think what, 44 years in the business has taught me, you don't do stupid things. So when markets are taking off, it's got to be calculated. So we will look at it and assess accordingly.

Understood. And then, Steve, maybe we could talk about just IVS Bulk JV. Are there any closing conditions that need to be fine-tuned or anything concerning for closing by the end of the third quarter? And then secondly, if you could talk about how from an accounting standpoint, you have the results that weren't included in the second quarter that you are economically benefiting from what is it April 30 from a standpoint of the financial statements. So can you talk about how that's going to be rolled into the fleet and rolled into the financials?

Yes, sure. Sure. So just in terms of that September deadline, we're in a position now we're going to close the deal well in advance of that. So there's no issues around the September, not meeting the September target date. So in terms of closing, no issues that I can foresee.

In terms of how we accrue for this, obviously, the cash or the earnings on the cash from the end of April accrue to us, but it doesn't go through the income statement. That will be a sort of balance sheet and then as a goodwill it will go through that when it closes. So it's also why we're keen to finalize this because -- as soon as possible because all of the earnings will then go through the income statement from date of transfer of ownership, which, as I say, will be well in advance of September.

And any idea of how the cash balance financial -- the balance sheet has changed since April 30? Can you update us on that? Or is it something...

Yes. Look, at the moment, we'd rather not disclose any further info on this until the transaction is completed. So we're happy to share that. And hopefully, it won't be too long.

Okay. Sounds good. And then just for you and my question from standpoint of OpEx looking at the third quarter and maybe the fourth quarter or maybe even to '22, should there be any material change in what your OpEx numbers were over the first half of the year?

Yes. I mean OpEx this year, we have a target we like to be under the $5,000 a day, and we have been hit with some issues. On OpEx, we've had some higher repatriation costs arriving from COVID issues. It has been expensive flat total quarantine. So we feel we can improve on that figure. And then also our interest in our cash breakeven with the payback of the (inaudible) loan, we expect that to come off a bit charter costs. As you've seen for the second half -- for the second half is slightly higher. So we believe that we can more than offset the increase in the charter costs by decreases on the OpEx and the interest side. So yes, target is to be slightly lower than this $11,630 on cash breakeven cost in the second half of the year.

Can I just add there? On the OpEx, yes, it's permanent because with quarantine, as I mentioned earlier about China, it's an ongoing battle and making sure that if you do end up with a ship with a crew and you got to change the crew where it can be done at times, we're having to balance several weeks to do it. We're not the only owner out there. I mean everyone's been caught, and it does flow through to the OpEx.

So it is something we're striving on, but you get this every now and then, this coming out of the blue, you have all your protocols and finally you get hit. And is it -- is the guy positive, is it false positive? It doesn't matter. You then have to make a plan. So -- and at that point, on this market, you spend whatever money you need to repatriate fly people. So it has impacted our OpEx, but it is something that, yes, we're hoping to improve.

Yes. Maybe yes, downtimes expenses any disruptions expenses, do you have any planned maintenance or drydocking over the second half of the year or into 2022?

Steve, (inaudible)

No, it's absolutely the program. Every 2.5 years, our ships go in. So it is a constant drydocking of vessels, and we try and spread it over time. So there's nothing unusual, I would say, in the second half of the year.

Okay. Great. And just a follow-up on the purchase option, I think, Martyn, you said that Pinehurst had a fixed option. They are a fixed price option. Would you be willing to share that price with us?

No, no, no, not at the moment, but it's attractive, and I just leave it at that. Very attractive.

Thank you. We will now take our next question.

It's J. Mintzmyer from Value Investor's Edge. Yes, it's good to be on the call. Congrats on shifting to quarterly format. I think that's going to open things up a lot. And the gentleman in front of me had some excellent questions, I think hit most of the things. I think what's left is mostly just small modeling questions.

Looking at your Q1 and Q2 breakdown, you report like an adjusted EBITDA and you report regular income. But the way you have your sales proceeds, it seems a little confusing to me, and maybe I'm just missing something obvious, but what was the actual gain on sale or loss on sales from those transactions?

Sorry, what were the sale transactions of ships?

The gain, yes. Correct.

No, there was nothing -- no gains on that. I mean, all of those were tankers, and we wrote down the vessels to selling price. So there was no profit or loss in those figures. All the impairments have been done in previous periods towards the end of last year.

Okay. Understandable. It's just interesting, in the revenue line, it has cost of ship sale and just an interesting [point obviously].

It's a legacy issue, your purpose reporting sale of ships and fleet revenue.

Okay. Just trying to strip out...

Happy to take you through it at some point, J. Yes.

Yes, that's fine. It's just kind of a modeling question. And then the other question on this Bain transaction, taking out the rest of the IVS Bulk. I understand that's closing later this quarter in the next. But when does the actual revenue share switch back over? Is Bain like enjoying the profits from July, August, September? Or did that already close a few months ago?

So that closes at the end of April. So as I said earlier, we get the cash, but we can only take it through the income statement once we sign the deal. So it will go to our balance sheet as sort of a negative goodwill or reduce the value of the assets. But yes, so as I say that's why we're keen to get the deal done as soon as possible, so we can grow our bottom line.

Understandable. Yes, there will be a massive catch up whenever that deal closes. And then finally, you talked about wanting to bring your leverage down a little bit. It's about 46% is the number you stated. Do you have any sort of target in mind? Is it like 30% or 40%? Or do you have any range?

First, let me say this. Steve and I -- yes, and Steve knows where I'm going. I'm very old school. I do have my Greek friends, 0 leverage. Now I appreciate that is very difficult. So it's somewhere between where we are and 0. Obviously, who knows a couple of years on the market, but it's -- yes, Steve, what is -- what are we aiming? 20%, 25%, 30%, I mean...

Yes, I mean, just trying to get low. Obviously, as the market value of the fleet goes up, then that gets better. But I think on current market values heading towards the 30%. But again, difficult to have a fixed percentage in mind.

Yes, certainly makes sense. I mean you want 0% at the very top going down and you want 99% at the bottom up, right? So I think you're doing fine. Randy alluded to this in his earlier question, but just looking at the way the days available flows through on your sheets, is that 4,100 number roughly combining the 2 segments? Is that a valid reasonable expectation for Q3 and Q4?

Sorry. Can you just say that again? I didn't get that. You're talking about the (inaudible)...

Amount of days.

Amount of day. No, you see in there, there's the short-term operating. And obviously, that we have some short-term ships that say are longer than just 30 days. They go on to some of them at 11 to 13 months that are not part of our core fleet, but they're in short-term operating. It's very difficult to estimate at 100% at the start of each quarter. But -- what's happened in the last quarter is a fair indication of the number of ships. And what Randy was trying to do is estimate that percentage. And I think with where we are being halfway through the 80% on the handys and just under 70% on the supras is probably fair.

Okay. Yes, that's helpful. Yes, we're asking the same question in different directions. It's a great call, and congrats on getting this quarterly thing done, and I look forward to the next quarter.

Thanks very much.

We will now take our next question.

It's [Gavin] from PSG. Congrats with the results. Just a quick hypothetical question on your dividend policy. So if we look at a sort of a full year run rate at spot rates, I guess, we could look at something north of $150 million a year in terms of your bottom line. If you probably 30% out, you still left in excess of like $100 million. And if you tip away on the debt, let's say, $20 million and purchase some vessels, $20 million, you're still left with quite a substantial amount of free excess cash in this business. And my question is how should I be thinking about special dividends of that excess cash that's going to be in your hands?

Gavin, yes, it's a good question. And obviously, if we have these type of profits for a sustained run, there's every chance of us looking at the dividend percentage and improving it. We started off with 30% because we've got other things that we need to do, as I mentioned earlier, in terms of allocation and cash. But this is -- this can be changed at any time. And hypothetical question, I would think. If -- we would probably relook at it if we're having that much free cash left over, 70% of $150 million. So it's flexible. It's there for now. And we'll obviously look at it, but I can't answer your question directly, give you a definite answer. But just to say that it is a flexible policy. Yes.

But Gavin, you have done the simple maths or math. It's quite easy to translate through what could happen after another 6, 12 months of this market, yes.

Yes. So maybe just a follow-up would be, should I think about debt repayments and vessel purchases as a gradual strategy? Or would there be bulk prioritization of those above special dividends?

Well, the purchase options are -- they're still going to run over the next 2, 3, 4 years, depending on the length of the charters and where we have them. And also, it's also got to factor in that obviously, we have these 5 older handys, and we will be selling them at some point and making sure that we have a modern fleet with ESG and all the restrictions and ticking as many boxes.

So it would then be a matter if we were to sell some of our older ships, we've had very little debt on them using that in the best possible way to exercise some of the options. So I don't think it's going to be done. I mean we have the options depending on where the market is. And the other smart thing to do is actually you just say, well, let's flip the ship and pocket don't know how much money has happened in back in 2007, '08 with companies where purchase option at $10 million were flipping them for $50 million, $60 million.

So it's something we'll always look at it. It will depend where we are on the market. But we are being conservative. And yes, do we dream? Of course, and where we could end up with this cash, and yes, we appreciate we will, as Steve said, we will have to adapt our dividend policy because there's no point in when you make yourself a target, don't -- have very much cash sitting around and doing nothing. So we will be looking at it, but let's get there first or at least be well on the way. It's a great start, and we're heading in the right direction.

We will now take our next question.

It's Charl here from Sanlam. Just a quick one around your 2 shareholders, both Grindrod at 10% stake and obviously, Remgro, which I think has publicly said they're not long-term holders of Grindrod Shipping. I mean just around capital allocation going forward and the potential to acquire some shares from them. Have you got any thoughts about that? Has there been discussions around the possibility of picking up some of those shares?

Charl, I'll take that. Obviously, look, I mean shareholders, what they want to do, it's their own decision. Yes, I think long term, we have said that at some point, they'd be wanting to get out, but the specific timing is really that's their decision. And in terms of Singapore law, we can't buy from an insider. So we would have to do whatever buybacks we do, we have to do it on the open market or in a -- certainly not from them. We do it through other brokers.

There are no further questions at this time. I would now like to hand back to management for closing remarks.

Thanks very much, operator. Thanks, everyone. And yes. Well, we look forward to reporting on Q3 in due course. So thank you, everyone.

Thank you.

That does conclude our conference for today. Thank you for participating. You may all disconnect.