Himalaya Shipping Ltd. (HSHP) Earnings

Management highlights

- Financial Performance * Reported Q1 2026 earnings per share of 11 cents, compared to a 14 cent loss per share in Q1 2025 * Time charter equivalent (TCE) earnings for Q1 2026 averaged $32,300 per day, up from $21,100 per day in Q1 2025 * Cash flow from operations was $9.8 million, up sharply from $0.3 million in Q1 2025 * Cash and cash equivalents totaled $24.5 million at quarter-end, meeting the $12.3 million minimum cash requirement under sale leaseback financing * Declared 18 cents per share in total cash distributions for Q1 2026, marking 28 consecutive months of dividends - Corporate Updates * Increased ownership stake in 2020 Bulkers Management AS from 40% to 54% via acquisition of an additional 4,200 shares for 1.1 million Norwegian crowns, effective April 1 2026 * Himalaya Shipping's 12-vessel fleet of modern dual-fuel LNG Newcastle MAX bulk carriers ranks in the top 1% of emission ratings for large bulk carriers * Entered into new index-linked time charter agreements for Mount Ita (11-14 months), Mount Matterhorn (12-14 months), and Mount EMI (12-14 months), all at significant premiums to prevailing market indices * Post-quarter, April 2026 TCE earnings hit ~$41,600 per day, and an additional 15 cent per share cash distribution was declared for April - Commercial Strategy * Preferred strategy remains chartering most vessels on index-linked contracts to capture upside during market rises while retaining flexibility to convert to fixed rates when value appears on the forward FFA curve * As of Q1 2026, 11 of 12 vessels are exposed to the spot market to capitalize on projected strong market conditions in 2026 * Since inception, Himalaya vessels have traded at an average 48% premium to the Baltic Cape Size Index and 25% premium to peer vessels, driven by higher cargo capacity and industry-leading fuel efficiency * All-in cash break-even TCE is ~$17,300 per day against the Baltic Cape Size Index, meaning the company turns a profit when the index trades above this level - Market Analysis * Q1 2026 marked the strongest start to the year for Cape Size and Newcastle MAX markets since 2010, driven by high bauxite export volumes from Guinea, widespread fleet slow steaming, and increased global port waiting times * Cape Size ton-mile demand increased 4.3% year-over-year in Q1 2026, led by a 23% year-over-year increase in Guinea bauxite volumes and a 4.8% increase from global iron ore trade * Chinese seaborne iron ore imports are rising, as domestic Chinese iron ore has much lower iron content than high-grade imported ore from Brazil and Guinea, driving sustained demand for long-haul seaborne shipments * Guinea bauxite exports continue hitting new records in 2026, and now account for 20% of total cargo transported on Cape Size and Newcastle MAX vessels, supporting structural ton-mile demand growth * The Simandou iron ore mine in Guinea has ramped up operations, with export volumes growing rapidly as logistics improve; the mine targets 120 million tons of annual high-grade iron ore exports * Planned capacity increases from Vale are expected to further boost Atlantic basin export volumes and ton-mile demand * Supply dynamics are favorable: the Cape Size order book represents just 14% of the existing total fleet, and active shipyard capacity is down 60% from the 2008 peak, limiting new capacity additions over the next few years * Around 46% of the existing Cape Size fleet was built between 2009 and 2015, meaning ~30% of the fleet will be over 20 years old by 2030, with limited visibility of new capacity coming online to replace retiring tonnage * Approximately 24% of the total Cape Size and Newcastle Max fleet will require mandatory special surveys in 2026, competing for limited dry dock space; management estimates this will remove 1.7% of total fleet capacity from active service in 2026, not including additional congestion-related delays

Guidance

- Management projects continued strong dry bulk market conditions for 2026, supported by structural ton-mile demand growth and constrained supply, which is not fully priced into current forward FFA curves - Based on prevailing Baltic Cape Size Index levels (~$40,000 per day) at the time of the call, management expects the company to deliver an ~18% dividend yield on the current share price - At a Baltic Cape Size Index level of $50,000 per day, management projects an ~28% dividend yield, and at $60,000 per day, the projected yield approaches 35%

Segment performance

Himalaya Shipping operates as a single-segment dry bulk shipping company focused on modern Newcastle MAX bulk carriers. For Q1 2026, the company reported total operating revenues of $33.6 million, representing a 52.7% increase from $22 million in Q1 2025. Operating profit was $17.2 million, up from $6.5 million in the prior-year quarter. Net profit hit $5 million, a reversal from the $6.4 million net loss reported in Q1 2025. EBITDA was $24.5 million, up 77.5% from $13.8 million in Q1 2025. Vessel operating expenses totaled $7.4 million in Q1 2026 (up from $6.9 million in Q1 2025), with average daily operating expenses of $6,800, compared to $6,400 in the prior-year quarter. General and administrative expenses were $1.2 million, a slight increase from $1.1 million in Q1 2025. Interest expense was $12.4 million, a $0.7 million decrease from Q1 2025, driven by lower average outstanding loan principal following scheduled repayments.

Risks & headwinds

- All forward-looking statements about market conditions and future earnings are subject to material risks and uncertainties that could cause actual results to differ materially from current projections - The dry bulk shipping market is highly volatile, requiring the company to adjust its position rapidly in response to changing market trends - Rising vessel operating costs (for crew, spares, insurance, and services) have increased average daily operating expenses compared to prior periods - Dry dock congestion from a high volume of mandatory 2026 vessel surveys could lead to longer-than-expected off-hire periods for the broader fleet, though this also reduces overall available supply - New shipbuilding capacity could potentially expand faster than expected, altering favorable current supply dynamics, though management notes capacity constraints limit this risk over the next 2-3 years

Analyst Q&A

• Q: Management is more optimistic on the Cape Size market outlook than consensus and the forward FFA curve, which currently prices in lower rates than management's outlook implies. Where is the broader market misjudging conditions, and what key drivers will push rates higher from current levels? /

  A: Management notes that current forward FFA curves for H2 2026 have not fully priced in the observed supply tightness in the Atlantic basin, which is the main driver of current elevated rates. Sustained strong growth in bauxite volumes from Guinea, growing iron ore exports from the ramping Simandou mine, and a structural shortage of available tonnage in the Atlantic basin (compared to 3-4 years ago when more backhaul routes were available) will continue supporting higher rates. This outlook is reflected in management's decision to leave 11 of 12 vessels exposed to the spot market.

• Q: Himalaya Shipping's share price currently trades above net asset value (RNAV), giving the company currency for potential acquisitions. Given the bullish market outlook, is active fleet expansion a priority for management? /

  A: Management is always open to opportunities to grow the company and create additional value for shareholders. The stock's premium to RNAV is driven by the company's simple, transparent business model, low general and administrative costs, and established relationships with solid counterparties that investors value. Management will continue evaluating expansion opportunities that benefit shareholders.