GRINDROD swung from a net profit of just more than R1bn in 2014 to a loss of R1.37bn last year, saying economies worldwide had failed to grow fast enough to stem oversupply in weak commodity and dry-bulk shipping markets.
The freight, shipping and financial services group said on Thursday that a “persistent” fall in dry-bulk shipping rates had continued this year and was “at unprecedented levels”. This had resulted in significant losses.
This gave rise to an impairment of $100m in the shipping business, and further impairments in mineral logistics and rail operations. But CEO Alan Olivier put a brave face on the poor trading environment.
“Despite the fact that we have losses, we are cash-generative,” Mr Olivier said. “So, the balance sheet is strong.”
The group also said both the dry-bulk and tanker fleets had exceeded average spot-market rates and benchmark indices in “one of the most challenging years” for global shipping.
Momentum SP Reid Securities said Grindrod was a “steady ship”. Weak trading in the dry bulk shipping business was mitigated by strong performances in the tanker and ship-operating businesses. The ship-operating businesses had improved performance with increased volumes and new services.
Meanwhile, lower oil prices and an increase in the transportation of petroleum products resulted in good earnings for the tanker fleet. These increased volumes also benefited the marine fuels business.
This had been expanded in the previous year to increase coverage in Far East markets.
But Momentum SP Reid said oil prices and dry shipping were expected to trade even lower in a year’s time, and this painted “a dreary outlook”.
“The successful conclusion of a joint venture with (empowerment) partner RBT Resources paves the way for the expansion of the Richards Bay coal terminal to 4.5-million tonnes per annum,” Grindrod said.
It said the project should be completed in the third quarter of this year.
But regulatory delays relating to the Coega liquid-bulk terminal development had delayed that project, it said.
Meanwhile, reduced customer demand and excess road transport capacity as a result of weaker commodity prices had negatively affected the company’s rail businesses, the group said. Grindrod also said that progress on the north-south rail corridor and the north-west rail project had been hampered by significant excess road haulage capacity. These projects rely on copper and other minerals commodities being transported from Zambia, the Democratic Republic of Congo and Zimbabwe.
The group also said delays in the award of tenders, and cancellations, postponements and a scaling down of orders had affected earnings in the rail-construction and signalling businesses. However, its locomotives order book had firmed.
Group financial director, Andrew Waller, said Grindrod had nil gearing, and long-term backing through major shareholders, including Remgro, the Grindrod family, and the Public Investment Corporation. It had also raised considerable equity in recent years, including through its empowerment transactions.
Mr Waller said Grindrod’s oil and container businesses around SA’s coastline and feeder routes into Angola and Mozambique — along with sugar transportation from Durban to Cape Town, and its bunker fuels businesses in South African coastal cities — were keeping it afloat.
He said the big question was when minerals commodities markets would turn for the better. “With no debt, we are poised to be able to do things at short notice.”
The group has numerous strategic assets, including its Maputo port concessions and terminal operations in Mozambique, which are a gateway to sub-Saharan Africa markets.
Meanwhile, the group’s financial services business continued to grow, increasing earnings 47%.