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Grindrod achieves strong interim performance

26th August 2022

By: Tasneem Bulbulia

Senior Contributing Editor Online

     

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

This was underpinned by strong mineral commodity markets and Grindrod Bank continuing to perform well on the back of favourable net interest margins, outgoing CEO Andrew Waller said at a presentation of the group’s results on August 26.

He mentioned that the environment in which it operated 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 indicated.

Moreover, he noted the impact of increasing inflation and interest rates.

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

For the six months, Port and Terminals achieved earnings growth of 164% on the prior period owing to an increase in volumes handled. Maputo port volumes grew by 30% compared with the prior period.

Grindrod’s drybulk terminals grew volumes handled by 52% compared with the prior period despite various disruptive challenges.

Grindrod’s coastal shipping and container depot businesses performed well under the challenging operational environment with earnings growth of 88% on the prior period.

The Northern Mozambique graphite operations and the Clearing and Forwarding business delivered solid results for the period. Grindrod’s rail business showed an improvement in locomotive deployment.

Grindrod Bank reported healthy growth of 63% in its earnings from the prior period underpinned by the higher interest rate environment.

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

Grindrod continues to pursue the sale of noncore assets.

Marine Fuels earnings were up from the prior period owing to the strong oil market. Management continues to work with the Marine Fuels management and co-shareholder to exit this investment. The carrying value of the investment is R547.7-million.

The private equity portfolio exit is largely complete with only one significant asset remaining.

Management continues to explore various options to recover the significant loans advanced to the KwaZulu-Natal north coast property owners.

Grindrod reported a profit of R385.2-million for the period against a loss of R424-million in the prior period.

Headline earnings increased considerably to R404.4-million compared with R4.5-million in the prior period.

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

A gross interim dividend of 337c per cumulative, non-redeemable, non-participating and non-convertible preference share has been declared out of income reserves for the period.

The interim net preference dividend is 269.6c apiece for preference shareholders who are not exempt from dividends tax.

CORPORATE TRANSACTIONS

In early April, the fuel carrier fleet in Botswana was disposed of at its net carrying value, marking the completion of Grindrod’s exit from the fuel and automotive carrier businesses.

The joint venture transaction between Maersk Logistics and Services operations and certain of Grindrod’s container depots and its coastal shipping business was approved by the Competition Commission on May 24. The remaining conditions precedent relating to implementation steps are being executed.

The disposal of Grindrod Bank to African Bank for R1.5-billion is ongoing, with all parties focused on fulfilling the conditions precedent.

In terms of land, management continues to explore various options to recover the considerable loans and advances of R1.8-billion secured by two North Coast properties.

DIRECTORATE CHANGES

Mike Hankinson retired as a nonexecutive director and chairperson of the board with effect from June 3, following a 12-year tenure as director.

Cheryl Carolus was appointed as chairperson with effect from June 3. She is an experienced director.

Grindrod has appointed Xolani Mbambo to succeed Andrew Waller as CEO with effect from January 1, 2023.

OUTLOOK

Grindrod says global markets are showing low growth through to 2023, with inflation impacting heavily in the short term.

The minerals and agricultural commodity segment are forecast to be resilient.

The group’s strategy of separating the three businesses of Shipping, Bank and Freight Services and focusing on the core is noted to be almost complete.

All three businesses are said to be well-placed to grow in the future.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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