Operational review
strategy execution

Freight Services and Shipping

Freight Services and Shipping drive growth by investing in and optimising the utilisation of logistics infrastructure to provide integrated logistics solutions to clients.

The markets that drive bulk logistics globally have been depressed for the past two years, affected by a lack of demand and a resultant oversupply – and in South Africa persistent drought conditions affected the volume of agricultural commodities along logistics chains. In the second half of 2016, some markets, including coal and iron ore, improved, but the supply-demand balance remains delicate without sustained improvement in demand.

The severe decline in demand in the first half of the year affected volumes in virtually all Freight Services businesses and in the Shipping dry-bulk and tanker fleets. This put the operational focus firmly on improving asset utilisation, which included operating efficiencies, cost containment and negotiations to reduce rates in partnership with logistics providers in the corridors Freight Services operates in.

At divisional level, Freight Services impaired assets in the wake of a strategic decision to exit the severely affected locomotive-assembly business.

During 2016 the business remained cash-generative and at year-end its balance sheet was still adequately geared to execute on its key capital projects, these being:

  • Improving access to the Port of Maputo to accommodate panamax vessels. The 75-kilometre dredging project started in April and was completed in January 2017. The Grindrod TCM berth is also being deepened to accommodate the larger vessels.
  • Investing in a green-fields petroleum-products terminal in the port of Ngqura (Coega) through OTCG. 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.
  • Incrementally increasing the capacity of the RBTG coal terminal in Richards Bay. The base for the expansion of what was previously the 3.2-million-tonnes Navitrade terminal was laid when Grindrod formed a joint venture with RBT Resources. The short-term expansion target is 4.5 million tonnes.

Significant contracts that were concluded during 2016 support further geographical and commodities diversification:

  • A tender for the construction and management of a coal-handling terminal for an Eskom power station, awarded to Grindrod by Transnet in its private-sector-partnership programme.
  • The acquisition of the controlling interest in an Intermodal terminal at the Port of Nacala in central Mozambique, which is a developing logistics hub for the region and neighbouring countries.

Financial Services

Financial Services manages growth and profitability through a suite of niche investment, asset management, property finance and retail services.

In 2016, the division established a base for future expansion through merging Grindrod Asset Management with Infinitus Holdings Proprietary Limited. The newly established entity trades as Bridge Fund Managers.

Two new CoresShares tracker funds were listed, linked to US S&P indices, and the drive to establish CoreShares as a stand-alone venture gained traction with the conclusion of share transactions with RMI Holdings and Yellowwoods.

Key focus areas | 2017

All businesses will:

  • maximise asset utilisation;
  • improve operating efficiencies and cost;
  • develop an integrated approach to market with all group businesses;
  • drive to secure meaningful strategic capacity at good value;
  • manage strategic partnerships to facilitate execution and reduce risk;
  • monitor advances in technology and associated business opportunities;
  • reinforce the focus on our people; and
  • drive compliance with key transformation requirements.

At divisional level:

  • Shipping will:
    • continuously evaluate its business model for sustainability; and
    • develop a plan to take advantage of current opportunities, increase liquidity and ensure value uplift for shareholders.
  • Freight Services will:
    • continue exploring diversification opportunities;
    • develop terminal businesses;
    • implement focused restructuring in rail operations; and
    • investigate opportunities to grow its agricultural logistics base.
  • Financial Services will:
    • continue growing its products and market share, including expanding its asset-management business.

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