African Reserves Loans

Grindrod achieves strong intermediate performance

JSE-listed Grindrod delivered a strong performance for the six months ended June 30, delivering good earnings growth across its core businesses.

This was underpinned by strength in mineral commodity markets and Grindrod Bank continues to perform well thanks to favorable net interest margins, the outgoing CEO said. Andre Waller said during a presentation of the group’s results on August 26.

He mentioned that the environment he was operating in included global geopolitical conflicts and the pandemic causing supply chain disruptions.

There was also a generally strong commodity market and volatility in iron ore prices, buoyant agricultural markets and a high oil price environment, Waller said.

Additionally, he noted the impact of rising inflation and interest rates.

In the Southern African Development Community, Waller said, growth was fueled by high commodity prices and agricultural markets, while challenges included flooding in KwaZulu-Natal and disruptions to the power supply.

Over the half-year, Ports and Terminals achieved a growth in profits of 164% compared to the previous period thanks to an increase in volumes handled. Port of Maputo volumes increased by 30% compared to the previous period.

Grindrod dry bulk terminals increased volumes handled by 52% over the prior period despite various disruptive challenges.

Grindrod’s coastal shipping and container depot business performed well in a challenging operating environment with profit growth of 88% over the prior period.

The Northern Mozambique graphite business and the clearing and transit business delivered strong results over the period. Grindrod’s rail business showed an improvement in locomotive deployment.

Grindrod Bank reported healthy 63% growth in earnings over the prior period, supported by the higher interest rate environment.

Grindrod Bank’s capital adequacy ratio is in line with compliance requirements and its loan loss ratio at 48 basis points was below 2021 levels.

Grindrod continues to pursue the sale of non-core assets.

Marine Fuels earnings increased from the prior period due to the strength in the oil market. Management continues to work with management and the co-shareholder of Marine Fuels to exit this investment. The book value of the investment is R547.7 million.

The exit from the private equity portfolio is largely complete with only one major asset remaining.

Management continues to explore various options to recover large loans to landowners on the North Coast of KwaZulu-Natal.

Grindrod posted a profit of R385.2 million for the period compared to a loss of R424 million in the prior period.

Overall profit increased significantly to R404.4 million from R4.5 million in the prior period.

A gross interim dividend of 17.20c each has been declared against income reserves for the period. The net ordinary interim dividend is 13.76c each for ordinary shareholders who are not exempt from dividend tax.

An interim gross dividend of 337c per cumulative, non-redeemable, non-participating and non-convertible preference share was declared on the income reserves for the period.

The net preferential interim dividend is 269.6 cents each for preferred shareholders who are not exempt from dividend tax.

CORPORATE OPERATIONS

In early April, the fuel carrier fleet in Botswana was sold at net book value, marking the completion of Grindrod’s exit from the fuel carrier and motor vehicle business.

The joint venture transaction between the operations of Maersk Logistics and Services and some of Grindrod’s container depots and cabotage business was approved by the Competition Commission on May 24. The remaining conditions precedent relating to the implementation stages are being fulfilled.

Grindrod Bank’s sale to African Bank for R1.5 billion is underway with all parties focused on meeting the conditions precedent.

In terms of land, management continues to explore various options to recover the substantial loans and advances of R1.8 billion secured by two properties on the north coast.

DIRECTION CHANGES

mike hankinson retired as a non-executive director and chairman of the board of directors with effect from June 3, after serving 12 years as a director.

Cheryl Carole was appointed Chair effective June 3. She is an experienced administrator.

Grindrod named Xolani Mbambo to succeed Andrew Waller as CEO as of January 1, 2023.

OUTLOOK

Grindrod says global markets are showing weak growth through 2023, with inflation having a big impact in the near term.

The minerals and agricultural commodities segment should be resilient.

The group’s strategy of separating the three activities of Shipping, Banking and Freight Services and focusing on the core business is considered almost complete.

All three companies would be well placed to grow in the future.