Himalaya Shipping : Interim Financial Statements Q1 2024

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 UNDER THE

SECURITIES EXCHANGE ACT OF 1934

May 23, 2024

___________________________

Commission File Number: 001-41676

____________________________________________

Himalaya Shipping Ltd.

(Translation of Registrant's name into English)

____________________________________________

S.E. Pearman Building

2nd Floor 9 Par-la-Ville Road

Hamilton HM11

Bermuda

(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 Yes ☒ No ☐

INFORMATION CONTAINED IN THIS FORM 6-K REPORT

Included in this Report on Form 6-K is our Unaudited Consolidated Financial Statements for the three months ended March 31, 2024.

Exhibits.

Exhibit Description

99.1 Unaudited Interim Financial Report for the three months ended March 31, 2024

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Himalaya Shipping Ltd. (Registrant)

	By:	/s/ Herman Billung
	Name:
	Herman Billung
May 23, 2024	Title:	Chief Executive Officer

UNAUDITED INTERIM FINANCIAL REPORT

Forward-Looking Statements

This document and any other written or oral statements made by us in connection with this document may include forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 that involve risks and uncertainties. All statements other than statements of historical facts are forward-looking statements. These forward-looking statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995.

You can identify these forward-looking statements by words or phrases such as "aim," "believe," "assuming," "anticipate," "could," "expect," "intend," "estimate," "forecast," "project," "likely to," "plan," "potential," "will," "may," "should," or other similar expressions. These forward-looking statements include statements about plans, objectives, goals, strategies, future events or performance, including outlook, prospects, contracts to acquire newbuilding vessels and associated financing agreements, expected delivery of our vessels under our newbuilding program, statements about the benefits of our vessels, including the ability to bunker with LNG, LSFO, or HSFO, the terms of our charters and chartering activity, dry bulk industry trends and market outlook, including activity levels in the industry, expected trends, including trends in the global fleet, expected demand for vessels and utilization of the global fleet and our fleet, fleet growth, new orderings, limited yard capacity, statements about our dividend objectives and plans, expected growth in vessel supply and state of current global fleet,, and the statements in this document under the heading "Going Concern" in Note 1 of the Unaudited Condensed Consolidated Financial Statements for the three months ended March 31, 2024 (the "Unaudited Consolidated Financial Statements").

These forward-looking statements are not statements of historical facts and are based upon current estimates, expectations, beliefs, and various assumptions, many of which are based, in turn, upon further assumptions, and a number of such assumptions are beyond our control. These statements involve significant risks, uncertainties, contingencies and factors that are difficult or impossible to predict and are beyond our control, and that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements, including:

• general economic, political and business conditions;
• general dry bulk market conditions, including fluctuations in charter hire rates and vessel values;
• our ability to complete the purchase of the vessels we have agreed to acquire;
• our ability to meet the conditions and covenants in our financing agreements;
• changes in demand in the dry bulk shipping industry, including the market for our vessels;
• changes in the supply of dry bulk vessels;
• our ability to successfully re-employ our dry bulk vessels at the end of their current charters and the terms of future charters;
• changes in our operating expenses, including fuel or bunker prices, dry docking and insurance costs;
• changes in governmental regulation, tax and trade matters and actions taken by regulatory authorities;
• compliance with, and our liabilities under, governmental, tax environmental and safety laws and regulations;
• potential disruption of shipping routes due to accidents, hostilities or political events;
• our ability to refinance our debt as it falls due;
• our continued borrowing availability under our sale and leaseback agreements in connection with our vessels and compliance with the financial covenants therein;
• fluctuations in foreign currency exchange rates;
• potential conflicts of interest involving members of our board and management and our significant shareholder;
• our ability to pay dividends and the amount of dividends we ultimately pay;
• risks related to climate change, including climate-change or greenhouse gas related legislation or regulations and the impact on our business from climate-change related physical changes or changes in weather patterns, and the potential impact of new regulations relating to climate change, as well as the impact of the foregoing on the performance of our vessels;
• other factors that may affect our financial condition, liquidity and results of operations; and
• other risks described under "Item 3. Key Information - D. Risk Factors" in our Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission (the "SEC") on March 27, 2024.

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The foregoing factors that could cause our actual results to differ materially from those contemplated in any forward-looking statement included in this report should not be construed as exhaustive. Any forward-looking statements that we make in this report speak only as of the date of such statements and we caution readers of this report not to place undue reliance on these forward-looking statements. Except as required by law, we undertake no and expressly disclaim any obligation to update or revise any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made.

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Management Discussion and Analysis of Financial Condition and Results of Operation

The following is a discussion of our financial condition and results of operations for the three months ended March 31, 2024 and 2023. Unless the context indicates otherwise, the term "Himalaya Shipping" refers to Himalaya Shipping Ltd. and the terms "Company", "we", "Group", "our" and words of similar import refer to Himalaya Shipping and its consolidated companies. Unless otherwise indicated, all references to "$" in this report are to U.S. dollars. You should read the following discussion and analysis together with the financial statements and related notes included elsewhere in this report. For additional information relating to our operating and financial review and prospects, including definitions of certain terms used herein, please see our annual report on Form 20-F for the year ended December 31, 2023.

Overview

We are a bulk carrier company with ten vessels that have been delivered and are in operation, and contracts to acquire an additional two vessels under construction, which when delivered will give us a fleet of 12 Newcastlemax dry bulk vessels each with capacity in the range of 210,000 dwt. Our vessels are equipped with the latest generation dual fuel LNG technology, with fuel-saving devices and exhaust gas cleaning systems or "scrubbers", which we believe make our vessels more fuel efficient, more cost effective, and environmentally friendly as compared to older dry bulk vessels without these features.

We expect the dual fuel capability to be a benefit when LNG is economical to use. One of our vessels, Mount Elbrus, has been operating on LNG since its delivery in January 2024.

Recent and Other Developments

In addition to the other information set forth in this Report on Form 6-K, please see "Item 5. Operating and Financial Review and Prospects - Significant Developments since January 1, 2024" and "Note 18. Subsequent events" of our audited financial statements for the year ended December 31, 2023, which are included in our Annual Report on Form 20-F, filed with the U.S. Securities and Exchange Commission on March 27, 2024.

See below a description of certain developments that have occurred since March 31, 2024:

Delivery of new vessels

We took delivery of an additional newbuilding vessel, Mount Denali from New Times Shipyard in April 2024 and the time charter with the charterer commenced shortly thereafter.

Financing

In conjunction with the delivery of Mount Denali, the sale and leaseback financing arrangement with CCBFL closed and we drew down $49.2 million.

Dividends

Dividends declared in March 2024 of $0.03 per common share for a total of $1.3 million were paid in April 2024.

In April 2024, we declared dividends of $0.03 per common share for a total of $1.3 million, which were paid in May 2024 and in May 2024, we declared dividends of $0.04 per common share for a total of $1.8 million, which will be paid in June 2024.

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Operating and Financial Review

Set forth below is selected financial information for the three months ended March 31, 2024 and 2023.

	Three months ended March 31,
(in $ thousands)	2024	2023	Change	% Change
Total operating revenues	23,581	1,442	22,139	1535	%
Vessel operating expenses	(4,928)	(252)	(4,676)	1856	%
Voyage expenses and commission	(334)	(10)	(324)	3240	%
General and administrative expenses	(1,472)	(531)	(941)	177	%
Depreciation and amortization	(5,430)	(392)	(5,038)	1285	%
Total operating expenses	(12,164)	(1,185)	(10,979)	926 %
Operating income	11,417	257	11,160	4342 %
Total financial expenses, net	(8,925)	(280)	(8,645)	3088	%
Net income / (loss) before income taxes	2,492	(23)	2,515	(10935)%
Income tax expense	-	-	-	- %
Net income/ (loss)	2,492	(23)	2,515	(10935)%

Three months ended March 31, 2024 compared with the three months ended March 31, 2023

Net income increased by $2.5 million to $2.5 million for the three months ended March 31, 2024 compared to a net loss of $23.0 thousand in the same period in 2023. This is primarily a result of the following:

Total operating revenues:

Time charter revenue increased by $22.1 million. The increase is a result of nine vessels in operation during the three months ended March 31, 2024 compared to two vessels in operation during the three months ended March 31, 2023. During the three months ended March 31, 2024, the vessels earned an average daily time charter equivalent ("TCE") earnings, gross of $30,600/day, operating for a total of 798 days across the fleet compared to $28,200/day for a total of 53 days in the same period in 2023.

Set forth below is a reconciliation of average TCE earnings, gross (unaudited) to total operating revenues for the periods presented. See "Non-GAAP Financial Measures".

In $ thousands, except average daily TCE earnings and	Three months ended March 31,
number of days
	2024	2023	Change	% Change
Total operating revenues	23,581	1,442	22,139	1535	%
Add: Address commissions	840	55	785	1427	%
Total operating revenues, gross	24,421	1,497	22,924	1531	%
Fleet operational days	798	53	745	1406	%
Average Daily TCE earnings Gross	30,600	28,200	2,400	9 %

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Vessel operating expenses:

Vessel operating expenses increased by $4.7 million. The increase is a result of nine vessels in operation during the three months ended March 31, 2024 compared to two vessels in operation during the same period in 2023. Vessel operating expenses include, among others, crew costs, insurance, spares, lube oils and management fees. The average vessel operating expense per day across the fleet was $6,200 and $4,800 for the three months ended March 31, 2024 and 2023, respectively.

Average vessel operating expense per day is calculated by dividing vessel operating expenses by the number of calendar days the fleet operated in the three months ended March 31, 2024 and March 31, 2023 of 798 days and 53 days, respectively.

Voyage expenses and commission:

Voyage expenses and commission increased by $0.3 million. The increase is a result of nine vessels in operation during the three months ended March 31, 2024 compared to two vessels in operation during the same period in 2023. Voyage expenses and commission are mainly comprised of brokers' commissions.

General and administrative expenses:

General and administrative expenses increased by $0.9 million. The increase is primarily a result of an increase in administrative costs necessary to operate as a U.S. listed company following the Company's U.S. IPO in April 2023, which mainly resulted in increases in Directors and Officers Liability insurance of $0.3 million, director and employee costs of $0.2 million, legal fees of $0.1 million, and management fees from 2020 Bulkers Management AS of $0.2 million.

Depreciation and amortization:

Depreciation and amortization increased by $5.0 million. The increase is a result of the increase in the number of depreciable assets with nine vessels in operation during the three months ended March 31, 2024 compared to two vessels in operation during the same period in 2023.

Total financial expenses, net:

Set forth below is a breakdown of our total financial expenses, net for the periods presented.

	Three months ended March 31,
In $ thousands:	2024	2023	Change	% Change
Interest income	193	10	183	1830 %
Interest expense, net of amounts capitalized	(9,133)	(298)	(8,835)	100 %
Other financial expenses, net	15	8	7	88 %
Total financial expenses, net	(8,925)	(280)	(8,645)	3088 %

Interest income increased by $0.2 million. The overall increase is a direct result of an increase in the average cash balance during the three months ended March 31, 2024 compared to the same period in 2023, resulting in an increase in interest income.

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Interest expense, net of amounts capitalized, increased by $8.8 million. The increase is mainly due to the increase in outstanding debt from $197.5 million as of March 31, 2023 to $583.3 million as of March 31, 2024 following the delivery of seven vessels. Upon delivery of the vessels, the Company closed its sale and leaseback financing arrangements, whereby upon delivery, the vessels were sold to special purpose vehicles ("SPVs") and leased back to the Company under bareboat charters. Nine vessels were operating under bareboat charters during the three months ended March 31, 2024 compared to two vessels in the same period in 2023.

Adjusted EBITDA: Adjusted EBITDA increased by $16.2 million for the three months ended March 31, 2024 compared to the same period in 2023. Adjusted EBITDA is a non-GAAP measure. We present Adjusted EBITDA because we believe this measure increases comparability of total business performance from period to period and against the performance of other companies. Set forth below is a reconciliation of Adjusted EBITDA to net profit (loss) for the periods presented. See "Non-GAAP Financial Measures".

	Three months ended March 31,
In $ thousands:	2024	2023	Change	% Change
Net profit (loss)	2,492	(23)	2,515	(10935) %
Depreciation and amortization	5,430	392	5,038	1285	%
Total financial expenses, net	8,925	280	8,645	3088	%
Income tax	-	-	-	- %
Adjusted EBITDA	16,847	649	16,198	2496 %

Liquidity and Capital Resources

We operate in a capital-intensive industry and have substantially financed our purchase of newbuildings through a combination of equity capital, and sale and leaseback financing. Since the delivery of the six vessels in 2023 and the delivery of the four vessels in 2024, we have financed our working capital requirements from cash generated from operations and equity offerings.

Our ability to generate adequate cash flows on a short and medium-term basis depends substantially on the trading performance of our vessels. Periodic adjustments to the supply of and demand for dry bulk vessels cause the industry to be cyclical in nature.

We expect continued volatility in dry bulk market rates for our vessels in the foreseeable future with a consequent effect on our short and medium-term liquidity.

Our short-term liquidity requirements relate to funding working capital requirements, payment of newbuilding installments, and lease payments under our sale and leaseback agreements. Sources of short-term liquidity include cash, payments from customers under charters, and amounts available under our $10 million Revolving Credit Facility with Drew, under which drawings are permitted until December 31, 2024. In addition, our sale and leaseback agreements contain debt incurrence covenants which could limit our ability to raise debt financing to meet liquidity or other capital requirements.

As of March 31, 2024, we had cash and cash equivalents of $25.7 million. Our cash and cash equivalents are held primarily in U.S. dollars.

As of March 31, 2024, the remaining payments required for our three shipbuilding contracts amounted to $155.7 million. Under the sale and leaseback agreements, as of that date we had committed financing for the delivery installments under the shipbuilding contracts for an estimated amount of $147.6 million (of which $49.2 million has since been drawn to fund the delivery installment of "Mount Denali").

Our medium and long-term liquidity requirements include lease payments for our vessels and working capital requirements.

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Borrowing Activities

As of March 31, 2024, we had principal debt outstanding of $598.0 million, of which $17.8 million and $6.6 million are payable in the remaining nine months of 2024 and the first three months of 2025, respectively.

As of March 31, 2024, we were in compliance with all our covenants under our financing arrangements. See Note 13 - Debt in our unaudited consolidated financial statements included herein for additional information.

CCB Financial Leasing Co., Ltd. ("CCBFL") - Sale and leaseback financing arrangements

During the three months ended March 31, 2024, the Company drew $49.2 million on the financing to pay scheduled delivery installment on the "Mount Elbrus."

After 180 days following the delivery of each newbuilding, each subsidiary under the CCBFL sale and leaseback arrangement is required to maintain a minimum cash balance equivalent to the bareboat hire payable within the next three months which amounts to approximately $1.5 million per vessel.

As of March 31, 2024, the Company is required to maintain a total minimum cash balance of $3.0 million in the subsidiaries that lease "Mount Matterhorn" and "Mount Neblina," which is included in cash and cash equivalents as of March 31, 2024 as there are no legal restrictions on the bank account.

Jiangsu Financial Leasing Co. Ltd ("Jiangsu") - Sale and leaseback financing arrangements

The Company drew down $98.6 million from Jiangsu for delivery installments on "Mount Hua" and "Mount Bandeira" during the three months ended March 31, 2024.

Cash Flows

The table below sets forth cash flow information for the periods presented.

	Three months ended March 31
In $ thousands
2024	2023	Change	% Change
Net cash provided by operating activities	11,172	2,569	8,603	335 %
Net cash used in investing activities	(153,812)	(130,815)	(22,997)	18 %
Net cash provided by financing activities	142,814	128,964	13,850	11 %
Net increase in cash and cash equivalents and restricted	174	718	(544)	(76)%
cash
Cash and cash equivalents and restricted cash at	25,553	263	25,290	9616 %
beginning of period
Cash and cash equivalents and restricted cash at end of	25,727	981	24,746	2523 %
period

Operating Activities

Net cash provided by operating activities increased by $8.6 million to $11.2 million for the three months ended March 31, 2024 compared to $2.6 million for the same period in 2023. The increase is primarily a result of the increase in operating profit in the quarter ended March 31, 2024 due to an increase in the number of operating vessels and operating days.

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