Freight and financial services group Grindrod has achieved a strong year-on-year recovery in the six months to June 30, with its earnings a share having increased to 317c, compared with a loss a share of 11.5c in the first half of 2017.
Headline earnings a share were 3.8c, compared with a headline loss a share of 17.2c in the first half of 2017.
However, Grindrod has not declared an interim ordinary dividend, as was the case in the first half of 2017.
During the reporting period, Grindrod successfully implemented its strategy to spin-off and separately list its shipping business, with a primary listing on the Nasdaq and a secondary listing on the JSE.
“The conclusion of the spinoff has cleared the path for renewed strategic focus on the remaining businesses,” Grindrod executive chairperson Mike Hankinson said on Friday.
The remaining businesses are financial services and freight services, which is broken down further into port and terminals, logistics and marine fuel and agricultural logistics.
Diversification and scale is in store for the next year, Hankinson added.
The exit of the shipping business impacted on Grindrod’s net asset value a share, which decreased to R12.57 in the first half of this year, compared with R19.09 in the first half of 2017, inclusive of the shipping business.
PORTS AND TERMINALS
The Grindrod-operated Maputo port continued to benefit from the access channel dredge, which accommodates Panamax vessels, achieving strong volume growth. During the reporting period, the port handled 9.7-million tonnes, which is a 15% increase compared with the first half of 2017.
Maputo port will undergo slab development, port quay refurbishments and additional handling equipment will be acquired, which is expected to further improve volumes and port efficiencies for shipping lines.
Grindrod Freight Services outgoing CEO Bongiwe Ntuli said the port should be able to handle 30-million tonnes a year by 2033.
Meanwhile, the Richards Bay terminal handled 1.7-million tonnes, which is up 7% on the first half of 2017. Ntuli noted that there is a planned ramp-up for the terminal to handle four-million tonnes a year.
In terms of liquid terminals, Ntuli stated that construction of tank capacity at the Nautilus site, in Cape Town, is progressing to plan and completion is expected during the first half of 2019.
The Coega liquid tank facility relocation is progressing in terms of customer engagement and feasibility studies. Financial close is expected in the second half of this year.
The Walvis Bay terminal, in Namibia, is expected to see boosted volumes owing to new commodity exporters in the market.
The terminal’s inaugural lithium ore has been loaded and is ready for export. Two additional lithium consignments are planned for the rest of this year and Grindrod continues to plan around 2019 volumes.
During the reporting period, Grindrod completed a cross-docking facility development, to execute its Syrah Mining graphite logistics contract, which included a 10 000 m2 warehouse and a 30 000 m2 container yard.
Grindrod Group and Freight Services’ newly appointed CEO Andrew Waller said Grindrod’s ships agency and clearing and forwarding businesses were impacted on by lower port calls and underused warehouse capacity, while integrated carrier logistics and intermodal businesses also remain subdued in a difficult market.
However, the seafreight results continue to benefit from the extension of the business to landside cargo storage and handling activities, following its separation from the shipping business when it spun off.
Grindrod is in the process of selling its 34-locomotive-strong rail leasing operations in Sierra Leone, owing to continued losses, which is owing to a nearby mine closure , with a recorded impairment of R637-million.
Grindrod is also selling its GPR rail leasing operation; however, these 27 locomotives remain profitable and 80% deployed.
All is up to speed with the company’s North-South rail corridor, which runs 13 locomotives along an 827 km line from Beitbridge to Victoria Falls, linking the mining belt in Zambia and the Democratic Republic of Congo to South Africa’s ports.
Ntuli said volume improvements are expected along the corridor.
MARINE AND AGRI
Waller said there has been a record carry-over grain stock level in the South African agriculture sector, owing to grain being stored while the price was low. Profitability levels have improved compared with 2016/17 which saw drought in most parts of the country.
The marine fuels businesses benefited from increased oil prices and higher tonnages.
However, Waller anticipates challenging times ahead for marine fuels from 2020, since ship fuel burn is required to have lower sulphur emissions, effectively meaning heavy fuel oil will be replaced with lower-sulphur oil.
The financial services division reported solid results with an increase in earnings over the same period in the prior year. Strong performance of the UK Property Portfolio was reported.
Meanwhile, Grindrod Bank has been shortlisted, as one of four candidates, in the bidding process for Mercantile Bank, which was put up for sale by its Portuguese parent company Caixa Geral de Depositos.
An announcement on this bid is expected to be made soon.