Operational review
financial services

Key achievements | 2016

  • Improved safety management, as evidenced by reduction in the LTIFR from 0.67 to 0.59 (measured per 200 000 man hours worked).
  • Engaged with key supply-chain partners to negotiate logistics solutions to retain market share in a depressed commodities market.
  • Initiated the 75-km dredging project to make the Port of Maputo accessible for fully laden panamax vessels.
  • Fully contracted the capacity of the Richards Bay RBTG and Matola TCM terminals for 2017.
  • The long-term concession agreement between TPNA and OTGC was signed during December 2016.

Key challenges | 2016

  • Tailoring the business to mitigate the effects of the slump in logistics requirements due to depressed commodity markets and lower agricultural volume following another year of drought in the country.
  • Managing the exit from the rail-manufacturing businesses.
  • Driving business-improvement initiatives to return Grindrod Intermodal to profit.

Key focus areas | 2017

  • Continue to focus on achieving SHERQ targets across the division.
  • Negotiate initiatives with customers and other supply-chain operators to increase capacity utilisation across businesses.
  • Increase the customer and, where possible, the commodities base to improve infrastructure utilisation.
  • Negotiate customer tariff structures and contracts to make the petroleum-products terminal in the Port of Ngqura (Coega) a bankable project.
  • Continue developing the relationship with Transnet and pursue opportunities related to its private-sector partnership initiative.
  • Investigate business expansion opportunities through the Port of Nacala, a developing hub in Mozambique.
  • Complete the exit from the rail-manufacturing businesses.

Key ratios

Maputo Port experienced a decline in volumes due to depressed markets during the first half of 2016. Despite volume improvement in the second half as a result of improved market demand, commodities throughput was 14.9 million tonnes against 15.6 million tonnes in 2015.

Capital investment in the port, in which Grindrod holds a 24.7 per cent interest, is guided by the port master plan. The 75-km dredging project to make the port accessible for fully laden panamax vessels was started in May 2016 and was completed early in 2017.

Smaller investments were focused on maintenance and infrastructure projects to improve access to and mobility in the port, such as roads, gate access, open paved areas and berths.

The final element of the current plan will focus on expanding the corridors servicing the port, in accordance with the integrated rail and port strategy which aims to ensure logistics alignment with the planned port throughput. The strategy targets competitive rail tariffs and an adequate supply of appropriate rolling stock to encourage terminal operators to move more cargo by rail.

The project to make the Grindrod TCM berth accessible to the larger vessels commenced in 2016 and is targeted for completion in August 2017.

SHERQ programmes were broadened to include initiatives to entrench safety awareness in the community and promote employee development and wellness.

Terminals recorded a 13.6-per-cent increase in volume. Significant improvement in the commodity prices – coal and magnetite – during the second half of the year sparked the demand offsetting poor performance recorded in the first half of the year.

GML secured a long-term, multi-product agricultural contract to manage imports into Africa through the Merec agricultural terminal it operates in Maputo. The terminal, which GML started operating in April, provides facilities for handling wheat, maize, soybeans and soya meal.

A significant, long-term diversification opportunity remains the development of a petroleum-products terminal in the Port of Ngqura (Coega) on Transnet concession land, with an initial 170 000m3 capacity. The long-term concession agreement was signed during December 2016 between TNPA and OTGC to plan, fund, construct, own, maintain and operate the new facility.

In 2017 improved capacity utilisation at the TCM terminal in Maputo and the Richards Bay RBTG terminal is expected following new magnetite and coal contracts secured by Terminals.

Terminals looks forward to an improved financial performance in 2017.

Rail businesses were again severely impacted by weak commodity markets. Capital investments in green-fields projects continue to be postponed as demand slumps, aggravated by aggressive road-haulage rates because of over-capacity in the road-transportation business.

Market conditions prompted the board to amend the Rail strategy and Grindrod initiated the process of exiting the locomotive manufacturing businesses. In 2017, Rail will focus on the retained and profitable management and operational services businesses, which include mainline operations, freight-brokering and leasing.

Carrier Logistics reported a profit of R4.2 million (excluding once-off adjustment), which is 91.4 per cent lower than in 2015 as a result of continuing adverse conditions.

The auto transportation business was affected by a 11.4-per-cent decline in new-vehicle sales and car carrier supply exceeded demand. New contracts, an increase in second-hand shipments and sound management ensured that the business could maintain the turnaround to profit achieved in 2015. The division’s sound reputation, which includes 99.1 per cent on-time deliveries, saw one contract being extended and three new contracts won, including one with Mercedes-Benz and a small, but prestigious, contract to transport Bentleys.

The fuel-transportation businesses also experienced tight market conditions. Grindrod Fuelogic in South Africa, Fuelogic Namibia and Grindrod Petrologistics in Botswana and Namibia continued to be profitable, but Grindrod Fuelogic in Mozambique continued to experience very challenging conditions.

Carrier Logistics foresees no change to market conditions in the auto and fuel transportation businesses in 2017 and remains focussed on improving volumes and efficiencies.

Grindrod Intermodal, which recorded improved financial results during the latter part of 2016 following business interventions and restructuring, laid the foundation for further expansion in Mozambique by acquiring the majority shareholding in a terminal at the Port of Nacala, a developing logistics hub for the region and neighbouring countries.

Ships Agency and Clearing and Forwarding was also under pressure, but made a profit of R69.5 million.

Sturrock Grindrod Maritime experienced an improvement in business conditions during the second half of the year and expects the improvement to continue into 2017.

South African operations performed well and the Australian business turned profitable for the last quarter, while the Angolan operation remains negatively affected by the subdued oil price.

Röhlig-Grindrod reported solid results and continues to explore value-adding services, including trade-finance solutions, to its large and diverse customer base. Its Level 2 B-BBEE contributor status offers a significant advantage in many of its market sectors. Its reputation as a leading supplier of freight and forwarding services will be further entrenched with the completion of the new state-of-the-art warehouse facility in 2017.

Agricultural Logistics, Grindrod’s investments in Senwes and NWK, were severely affected by the ongoing drought in Southern Africa, which caused crop volumes to shrink to 40 per cent of 2015 levels, although financing and retail performed satisfactorily. Management is exploring opportunities to increase its exposure to the agricultural logistics sector off the foundation provided by these investments.

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