The performance of JSE-listed freight and financial services company Grindrod’s core businesses improved during the first six months of this year, compared with the six months ended June 30, 2020, as operations recovered from the effects of the Covid-19 pandemic.

The company noted in a trading statement on August 17 that the Port and Terminals and Logistics divisions had benefited from the increase in cargo flows, high citrus and mining minerals exports and alternative solutions to the deep-sea shipping lines.

Port and Terminals reported earnings growth compared with the prior comparable period. Maputo Port volumes increased by 7% year-on-year to 9.4-million tonnes.

The Matola terminal handled 3.1-million tonnes, up 18% year-on-year.

The introduction of road-hauled magnetite volumes contributed to the increase, albeit at lower margins, the company said.

"The focus in the second half of the year is to continue our collaboration with Transnet to increase the rail allocation to our Port and Terminal facilities and address the lower margins at Matola."

Further, the coastal shipping, container depots and transport, and multipurpose terminal businesses achieved earnings growth compared with the prior comparable period. This was on the back of high citrus and mining mineral exports, while continually providing deep sea shipping lines with alternative solutions through its entire network to alleviate challenges.

"Driven by strong iron-ore prices, five of the ten locomotives which were not relocated from Sierra Leone were redeployed as the Tonkolili mine resumed activities."

The resumption of production at the Balama graphite mine during the period positively impacted on the Northern Mozambique performance, with volume ramp-up expected in the second half of the year in line with global demand.

Grindrod’s activities in the Northern Mozambique region relating to the liquefied natural gas project have ceased owing to the insurgency and subsequent indefinite suspension of the gas project at the beginning of April.

The business has implemented austerity measures, including suspending its activities and reducing liability exposure to the contractual obligations. These actions have necessitated impairments and the provisioning of R75.7-million for the period, Grindrod said.

Meanwhile, Grindrod Bank focused on its client relationships and quality lending during the period, ensuring it retained a strong liquidity and capital position.

"Earnings were up on the prior year's comparable period. The bank’s lending increased by 9% to R8.6-billion and core deposit books increased by 23% to R10.5-billion from December 2020.

The bank remains cautious in its lending activities. The strategic focus on platform banking has generated growth in the number of new accounts in the period. The bank refinanced the loan notes that matured in June. The bonds were oversubscribed and the pricing on the new three-year notes was 50 basis points better than those that matured.

Further, the group's results include a mark-to-market gain of R186.2-million on Grindrod Shipping shares owing to the increase in its listed share price.

"The group generated positive cash from operations. Net debt, excluding Grindrod Bank and International Financial Reporting Standards 16 liabilities, was 25% as at June 30."

NONCORE BUSINESSES

Grindrod continues to pursue the sale of noncore assets; however, the market remains challenging.

The disposals of the Automotive and Fuel Carrier businesses are under way. This necessitated the impairment of goodwill and assets of R260.9-million in the six months under review.

During the period, Grindrod concluded disposals of private equity assets resulting in proceeds of R176-million, of which R163.7-million was received by period-end. Results for the period include impairments and fair value losses of R301.7-million. The carrying value of the private equity and property portfolio as at June 30, was R983.3-million.

"Of the remaining private equity portfolio assets, two material investments have not produced acceptable offers. The strategy remains to exit the investments at the right valuations," the group said.

"Progress has been made by the owners on the development plan for the properties on the KwaZulu-Natal North Coast. Interest in various nodes within this development has continued and the owners are in the process of launching the prospectus. The strategy remains for Grindrod to have these exposures settled."

Further, the Marine Fuels business has been marginally profitable during the period. Management remains committed to an exit of this business.

Additionally, shareholders are advised that Grindrod is well advanced in its negotiations for the disposal of its private equity UK Real Estate asset in line with its previously announced decision to dispose of the private equity assets.

The carrying value of this asset, previously reported as at December 31, 2020, amounted to R507.1-million. The sales price has been negotiated for a cash consideration of £17.4-million, which is payable over a period.

The company will publish its interim results on August 27 and expects to report core headline earnings, which constitute its Port and Terminals, Logistics, Bank and Group businesses, of between R335-million and R355-million, compared with core headline earnings of R23-million reported for the first half of 2020.