Clear sailing ahead for Grindrod

Aug 15, 2003
Author: P&S

The strong rand has, it appears, proved no barrier to Durban-based logistics and shipping line owner and operator Grindrod, whose headline earnings rose to R95.4million in the six months to June.

The company was able to produce an impressive 24 % increase in earnings per share to 100.3 cents and if this carries on for the balance of 2003 South Africaís leading shipping line and operator can look forward to its fourth successive year of improved earnings.

Part of Grindrodís success, says managing director Ivan Clark, came from taking full advantage of improved trading and strong shipping markets to offset any negative impact experienced by the randís sudden strength against the dollar (the rand has risen 35 % against the dollar in a little over one year, hurting many dollar-based South African companies).

Revenue decreased slightly from R1.1Bn for the equivalent period last year to R1 Bn due to the rand and also the de-consolidation of previously consolidated operations. Nevertheless, Grindrod has declared an interim dividend of 18 cents per share, against 14 cents in 2002.

Grindrodís star performer, says Clark, is Island View Shipping (IVS), which saw a substantial increase in profitability during the period despite problems experienced in the South African bulk parcel service involving increased costs.

In the main, IVSí decision to increase the fleet during low shipping markets has brought its own reward with these ships now being either used directly by IVS or chartered into vastly improved world shipping markets.

These markets appear to remain favourable, due to the economic growth in China and the positive spin off this is having on the Japanese economy together with other supply and demand fundamentals.

Unicorn Shipping, which trades with a strong US dollar revenue flow against high interest charges from ship loans in rands, has been the division most negatively affected by the randís strong performance.

During the half-year Unicorn placed orders for a further two products tankers with a shipyard in Korea (see earlier reports in the NEWS section). This brings the number of products tankers on order to four, of which one will be employed on the South African coast in a joint venture with black economic empowerment (BEE) company Southern Tankers (also previously reported in Ports & Ships).

Grindrodís partnership with Safmarine Container Line, trading as Unifeeder, continued to perform well in providing the African coastal feeder service and meeting much of the domestic and regional shipping feeder requirements.

Grindrodís ships agency division has continued to perform well thanks in part to South African imports helping offset the reduction in exports caused by the stronger rand. Otherwise the groupís freight management division, which in many cases is export driven, saw a reduction in profitability over the same period in 2002.

ďOur landfreight logistics business expanded with the commissioning of a new facility in Richards Bay for a major customer, and we purchased a majority share in a logistics company now called PicPack Grindrod, providing us with entry into the smaller goods warehouse and Distribution business,Ē said Clark.

In a recent transaction Grindrod formed a joint venture with BEE company J&J Investments, which aims at taking advantage of logistics and port terminal opportunities in South Africa and neighbouring countries.

During the period Grindrod sold three vessels, but this has party been offset by progress payments of the products tankers now under construction.

Looking ahead, Clark says Grindrod remains confident. ďWith the current strength in world shipping markets and growth in existing business, Grindrod will achieve growth in earnings per share in 2003, despite the continuing strength of the rand against the US dollar.Ē

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