Operational review

Key achievements | 2016

  • Out-performed major shipping indices.
  • Took delivery of six new-generation, eco-friendly new-builds ordered from Japanese ship-builders – one owned handysize and two owned supramax dry-bulk carriers, one owned MR tanker and two long-term chartered supramax dry-bulk carriers.
  • Achieved zero oil spills in excess of one barrel for the 11th consecutive year.
  • Awarded Green Ship status for the IVS Berwick by the Maritime and Port Authority of Singapore (MPA) and the MPA Excellence in the Manpower Training and Development Award segment.
  • Maintained solid results in the ship-operating as well as seafreight feeder and container warehousing and distribution services.

Key challenges | 2016

  • Reporting a fatality in Shipping.
  • Managing the impact of depressed shipping rates on profitability.
  • Managing the dry-bulk and tanker fleets in turbulent, over-supplied markets.
  • Managing the effects of tough trading conditions on Cockett Marine Oil.

Key focus areas | 2017

  • Capitalise on the expected improvement in dry-bulk and liquid-fuels markets.
  • Manage liquidity to stay within bank-covenant requirements.
  • Focus on compliance with increasingly stringent IMO regulations.

Key ratios

Shipping reported a loss for the second consecutive year, with dry-bulk rates at historical lows and tanker rates slumping to 2014 levels. After an improvement in dry-bulk market conditions in the second half of the year and a subsequent increase in revenue, the loss for the year was R928 million (2015: R1 496 million).

Despite newbuilding order cancellations and 2.5 million tonnes a month of vessel scrapping, dry-bulk fleet over-supply increased during the year. By year end
dry-bulk fleet growth was 2.3 per cent. The global clean-product tanker fleet increased by some eight vessels a month, with a similar number expected to deliver in 2017. Stressed liquidity is expected to limit fleet growth as financial institutions historically involved in the shipping industry either withdraw from the market or apply ever-increasingly rigorous performance standards.

The effects of harsh market conditions were mitigated by Grindrod’s blue-chip status as the operator of the world-class IVS and Unicorn brands, continued investments in eco-friendly newbuildings at favourable prices and the dedication of the Shipping team to out-perform leading rate indicators.

The wholly or partially owned and long-term chartered fleet, calculated on a proportional basis grew from 38.2 to 41.2 vessels. Shipping took delivery of
five eco-friendly handysize and supramax dry-bulk carriers (three in joint venture) and one MR tanker and redelivered one handysize bulk carrier. One MR tanker was sold and chartered back for two years.

At year-end the division commercially managed 42 dry-bulk vessels, which include seven Japanese-owned handysize dry-bulk vessels on behalf of third parties. During the year, a further 20 vessels per month were commercially managed through short-term commercial management agreements.

The Grindrod tanker fleet is commercially managed through pool and long-term charter agreements.

Island View Shipping benefited from the rebound in demand for the major dry-bulk commodities in the second half of the year. China’s long-term strategy to cut CO2 emissions by partially substituting its high-ash domestic coal with low-ash, low-sulphur imports will continue to underpin the seaborne coal trade.

The negligible growth in fleet size and the increase in dry-bulk demand augurs well for higher rates in 2017.

Unicorn Shipping foresees no improvement in the first half of 2017 while markets are in over-supply and newbuildings are being delivered. Demand for capacity should increase in the second half of the year. Over the medium term, the opening of new refineries in the eastern hemisphere will underpin demand, requiring longer sea routes for clean-product delivery as older refineries in the west are closed down.

Seafreight experienced a stable year, successfully providing feeder services between major ports in Mozambique, South Africa, Namibia and Angola, adding value for customers through container, warehousing and distribution services at its Maydon Wharf terminal in Durban.

Ship-operating reported acceptable performance, supported by solid customer commitments for shorter-term parcel services.

Cockett Marine Oil reported a loss against prior-year earnings on lower volumes, smaller margins, exceptional items following the cancellation of a lease contract and the provision for material doubtful debts.

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