Himalaya Shipping Ltd. — FY2023 Form 20-F
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing, not a standalone Q4 report; the filing does not provide a clear Q4-only financial results breakdown. Financial statements are audited and prepared under U.S. GAAP, in U.S. dollars.
Business context
Himalaya is a Bermuda-based dry-bulk shipowner focused on 210,000-dwt Newcastlemax vessels with dual-fuel LNG capability and scrubbers. Six vessels entered service during 2023. Three more were delivered in January 2024, bringing the operating fleet to nine; the remaining three were expected to be delivered in Q2 2024. All 12 vessels had charter agreements.
Financial performance and position
| Metric | FY2023 | FY2022 |
|---|---|---|
| Operating revenue | $36.7 million | Nil |
| Operating profit (loss) | $14.6 million | ($2.0) million |
| Net income (loss) | $1.5 million | ($2.0) million |
| Adjusted EBITDA | $23.7 million | ($2.0) million |
| Operating cash flow | $6.5 million | ($1.4) million |
| Capital investment cash flow | ($413.1) million | ($78.2) million |
Revenue began with the first six vessel deliveries; gross average TCE earnings were $27,831 per operational day across 1,369 fleet days. Vessel operating expense averaged $6,300 per day. Interest expense, net of capitalized amounts, was $13.6 million. Operating and net margins, if desired, are not explicitly reported as filing metrics.
At year-end, cash and cash equivalents were $25.6 million, total assets $599.2 million, total liabilities $445.0 million, and shareholders’ equity $154.2 million. Debt, net of deferred financing charges, was $439.5 million, of which $19.8 million was current. Annual aggregate lease payments were approximately $76.2 million. The company also had an undrawn $10 million related-party revolving facility available, subject to its terms.
Changes and notable developments
- Revenue rose from zero as vessels entered service; net income improved from a FY2022 loss of $2.0 million to FY2023 income of $1.5 million.
- Operating expenses increased with fleet operations, depreciation began on delivered vessels, and net interest expense rose to $13.6 million as financing shifted from construction-period capitalization to expense recognition after delivery.
- Financing cash flow was $431.9 million, including net equity proceeds of $62.2 million and net debt proceeds. The company issued shares in its U.S. IPO and a December private placement; year-end shares outstanding were 43.9 million.
- Remaining shipbuilding installments at December 31 totaled $306.0 million, with $295.5 million of associated sale-and-leaseback financing committed, according to the filing.
- Management concluded the prior-year substantial doubt about going concern had been alleviated following equity raises and additional financing. It stated it expected sufficient resources for obligations over the 12 months from issuance of the financial statements and reported covenant compliance at year-end.
Outlook, risks and contingencies
Management expects a significant portion of the fleet to remain exposed to index-linked charter rates. As of March 20, 2024, five index-linked charters had been converted to fixed rates for periods of four to nine months. The company’s strategy is to maximize shareholder returns from its 12-vessel fleet; it indicated that dividends depend on cash generation, board discretion, legal requirements, financing covenants and subsidiary distribution limits. It declared post-year-end distributions of $0.01 per share for January 2024 and $0.03 per share for February 2024.
Management described the Capesize market as stronger in late 2023: the Baltic 5TC averaged $28,836 in Q4 versus $13,407 in Q3. It cited Brazilian iron ore and West African bauxite exports as supports, while identifying China’s economic slowdown and property-market weakness, geopolitics, charter-rate volatility and vessel supply as key downside risks. These are market observations, not company earnings guidance.
- Liquidity and leverage: Charter revenue is variable for many vessels, while bareboat payments are contractual; missed payments or covenant breaches could trigger default remedies, including loss of vessels. Restricted subsidiary cash balances can constrain upstream distributions.
- Execution and counterparties: Remaining newbuild deliveries were exposed to construction delays, cost overruns and shipyard/refund-guarantee counterparty risks.
- Revenue concentration: Three charterers accounted for all 2023 revenue (41%, 35% and 24%, respectively); a loss or default could materially affect results.
- Operating and market exposures: Risks include volatile dry-bulk rates, crew and operating costs, China trade demand, fuel economics, route disruption, casualty and insurance risks, and environmental regulation. EU ETS obligations applied to the fleet from 2024; charterers are typically expected to reimburse allowances under time charters, but implementation and recovery remain relevant.
- Unusual items and contingencies: No impairment charge was recorded for 2023. The filing reported no known current legal proceeding expected to have a material adverse effect. It disclosed a $2.7 million support fee paid to Magni, an affiliate of the largest shareholder, following delivery of the first four vessels.
Most important facts for investors to verify
- Actual delivery dates and financing for the final three vessels, including the remaining installment and scrubber obligations.
- Current debt, lease-payment schedule, covenant headroom, minimum cash restrictions and availability of the Drew facility.
- Charter mix, index-linked rate exposure, fixed-rate conversion terms, charterer credit quality and revenue concentration.
- Whether operating cash generation can cover lease payments, ongoing costs, capital needs and any declared distributions.
- Dividend capacity under financing agreements and subsidiary cash-distribution restrictions; verify payments declared after year-end separately from FY2023 results.
- Exposure to fuel-spread economics, EU ETS/FuelEU compliance costs, and any changes in route, market or regulatory conditions.