The group generated earnings of R277,4 million for the six months ended 30 June 2011 (H1 2010: R435,5 million), a 36% decline. Headline earnings per share decreased by 42% to 55,7 cents per share (H1 2010: 95,4 cents per share). The decline in earnings and headline earnings per share was primarily as a result of weak shipping markets, lower profitability from ship operating activities and the impact of the exchange rate.

An interim ordinary dividend of 17,5 cents per share (H1 2010: 27,0 cents per share) has been declared, maintaining dividend cover at 3,5 times. Return on ordinary shareholders’ funds for the six months was at 10,4% annualised (H1 2010: 16,2% annualised).

Strong earnings growth was achieved by the Freight Services division mainly due to increased volumes in Terminals. The Trading division showed a marginal increase in earnings with improved margins against slightly reduced volumes. The Shipping division’s decline in earnings was attributable to the weak shipping markets and poor results from the Parcel Service. Financial Services maintained its prior period level of earnings.

The group’s balance sheet remains sound with a debt:equity ratio of 47,5% at 30 June 2011.


Description Capital
Capital commitments
R million Six
months to
months to
2012 2013 2014 Total
Ships 499 507 521 41 1 069
Property 14 57 208 83 348
Terminals 35 144 16 1 1 162
Vehicles, locomotives and equipment 47 196 9 4 4 213
  595 904 754 129 5 1 792
Acquisition of businesses 4 21 21
Intangible assets 1 13 13
Total 600 938 754 129 5 1 826

Capital expenditure was directed towards the group’s ship newbuilding programme and the expansion of terminal capacity. Future capital commitments are to be utilised for expanding of capacity of terminals, purchasing of locomotives and ships.

The commitments exclude the further expansion of capacity in Maputo and Richards Bay currently being developed.


Operating profit before working capital changes was R572,6 million (H1 2010: R658,1 million). Cash outflows include investment in working capital of
R712,7 million largely as a result of a rise in commodity prices, capital expenditure of R599,6 million and dividends of R151,6 million. This resulted in the net debt position at 31 December 2010 of R1 904 million increasing to R2 947 million at 30 June 2011 and the net debt:equity ratio rising from 31,9% to 47,5%. The group incurred a net interest expense of R49,0 million for the period compared to net interest income of R6,1 million in the same period of the prior year, mainly attributable to the increased borrowings.

The group is confident that it has secured adequate funding for all capital commitments through its cash resources and bank borrowings.

Net debt


Shareholders’ equity increased from R5 857 million at 31 December 2010 to R6 109 million due to retained profits and the effect of the weaker closing Rand/US Dollar exchange rate.

The 9 179 348 ordinary shares repurchased by subsidiaries in prior years continue to be held in treasury.


Earnings declined by 81% following reduced contributions from all business units.

The drybulk business despite a weaker market managed to achieve overall average earnings per day above average spot rates across all sectors.

The tanker business experienced reduced profitability through the continued worldwide downturn in chemical and industrial production.

Ship operating results were adversely affected by the performance of the Parcel Service where profitability declined due to the increase in the piracy zone which led to increased steaming time.

The South African based tanker operating joint venture with Calulo Shipping performed well as did the local bunker tanker business. The Rotterdam bunker barge business was affected by the depressed market as a result of oversupply.

The group has an owned and long-term chartered fleet of 35 ships of which 57% (weighted by revenue) of the ships are contracted out for the second half of 2011 and 28% (weighted by revenue) for 2012. The value of profit contracted is US$10,7 million for the second half of 2011 and US$23,0 million for 2012.

A fleet overview, contract cover information and details of the fleet market value calculations are included in the investor relations page on the website

Commodity demand remains firm, however, is outweighed by the oversupply of ships.

Drybulk asset prices have fallen in line with the weaker market.

The handysize sector, in which the company is well represented, is seeing a record volume of scrapping which will limit fleet growth going forward.

The recent sharp spike in medium-products tanker earnings illustrates how tight the supply and demand equation is and reinforces the general optimism of a recovery in earnings during 2012.

Asset prices for both new and secondhand tankers have increased.

Freight Services
Freight Services earnings increased by 49% compared with the half year to 2010 and accounted for 55% of the group’s earnings.

Ports and Terminals
Earnings increased 19% over the first half of 2010 driven by efficiencies at the port of Maputo concession company, the Maputo car terminal and the Maputo and Richards Bay coal terminals. These operations each benefitted from higher throughput. The increase in earnings was achieved despite the strong Rand/US Dollar exchange rate.

Rail resource utilisation on the Maputo corridor improved following a joint initiative involving Transnet Freight Rail, CFM (the Mozambique rail authority) and Grindrod. Further benefits are anticipated in the second half of 2011. Initiatives to provide additional rail wagons are being pursued to fully service existing export capacity at the Richards Bay and Maputo drybulk terminals and the Maputo car terminal.

The concession for the port of Maputo was extended to 2043. The expansion plan to dredge the port from 9,4 metres draft to 11 metres, which was completed in the first quarter of 2011, has increased the port’s competitiveness. Further expansions of the port’s infrastructure are planned.

The Maputo coal terminal expansion to 6 million tonnes annual capacity was completed at the end of the first quarter of 2011, with record tonnages subsequently achieved. A feasibility study to expand the terminal capacity to 20 million tonnes of coal and 10 million tonnes of magnetite will be completed in the second half of 2011.

Improved earnings are anticipated in the second half of the year as port and terminal operations continue to benefit from the improved demand for commodities, particularly coal, and the further ability to improve throughput and capacity utilisation. The continuing effort to increase rail resources is likely to further enhance performance.

Earnings of R53 million were ahead of the prior year, however, results include a profit of R22 million from the sale of the perishable cargo business.

Road transport earnings were impacted by industrial action and further challenged by reduced volumes and plant shutdowns in the automotive sector following the disaster in Japan. The petrochemical road transportation operations acquired in 2010 traded in line with investment expectations for this new business. Improvements in earnings and further rationalisation in the road transport businesses are anticipated in the second half of the year.

Earnings growth was achieved by the intermodal operations when compared against the same period in the prior year. Growth was driven by an increase in container volumes and the successful consolidation of operations at the recently expanded facility in Durban.

Capacity expansion opportunities continue to be a focus area with a new intermodal facility being established in partnership with Dubai Port World in Maputo and the planned consolidation of operations in Johannesburg in 2012 at a new site.

Performance of the Logistics business segment is expected to improve in the second half of the year as greater benefits are extracted from the further optimisation of the transport operations combined with a projected strengthening in volumes across all sectors.

Revenue increased by 24% compared to the first half of 2010. This was due to commodity price increases as volumes declined slightly following delayed crop harvesting, competitive market conditions and increased focus on margin and risk.

Earnings growth of 2% was achieved in spite of a stronger Rand/US Dollar exchange rate. Operating margin per tonne improved from US$3,45/tonne to US$3,80/tonne compared to the same period in the prior year.

The division continued to grow its presence in the agricultural sector through new trading opportunities in sub-Saharan Africa and the development of supply chain participation projects in crop finance, storage facilities and milling activities.

Marine fuels performed well in a highly competitive market. The new offices established over the last year in Australia, Korea and the United States are performing well. The business has been conservatively managed as management are mindful of increasing credit risk.

The metals and minerals business improved its 2010 performance following contributions from its chrome ore investment and improved profitability from stainless steel trading and merchanting. In addition, coal trading benefitted from a long-term off take agreement as well as increased coal terminal throughput.

Whilst markets are likely to remain volatile, continuing demand for commodities combined with the favourable effect of new business opportunities and growth in supply chain participation are likely to positively impact the division’s performance for the second half of 2011.

Financial Services
The Bank had a solid first half with attributable earnings 0,9% down on the comparative period in 2010. Fee income from all divisions was in line with expectations, with the increased contributions from Asset Management, Corporate Finance and Retail balancing earnings. Net interest income grew, despite pressure on funding margins, with advances levels maintained and credit pricing well managed. Liquidity was maintained at conservative levels and the lending book required no impairments for the period.

Third party assets under management continued to increase over the period, with positive returns achieved by the funds managed by the Bank. At
30 June 2011, funds under management totalled R5 billion. The platform for the launch of additional funds is now in place following the Financial Services Board approval of Grindrod Collective Investments as a registered fund management company.

The Bank expects a stable second half.

Basis of preparation
The results have been prepared in terms of IAS 34 Interim Financial Reporting and are in accordance with the group’s accounting policies which fully comply with International Financial Reporting Standards (IFRS), the Companies Act, No 71 of 2008 and the JSE Listings Requirements. They are consistent with those applied in the previous year.

The accounting for the acquisitions and disposals made by the group has been provisionally determined as at 30 June 2011. The group disposed of net assets of R26,1million during the period. A net consideration of R48,4 million was received in respect of these transactions. At the date of the finalisation of these results, the necessary market valuations and other calculations had not been finalised and they have therefore, been provisionally determined based on the directors’ best estimates of the likely values.

Messrs JG Jones and LR Stuart-Hill retired from the board effective 30 June 2011. Mr BJ McIlmurray, a member of the executive committee also retired on
30 June 2011.

The board of directors wish to express appreciation for their respective contributions to the company.

Mr HJ Gray was appointed to the executive committee on 1 June 2011 and is responsible for the logistics operations.

The positive yet volatile global commodity demand is expected to continue which will provide opportunities for growth in the Freight Services and Trading businesses whilst the oversupply of ships particularly in the drybulk sector, will continue to impact shipping earnings. Group results remain sensitive to the Rand/ US Dollar exchange rate.

Statements contained throughout this announcement regarding the prospects of the group have not been reviewed or reported on by the group’s external auditors.

For and on behalf of the board

IAJ Clark
AK Olivier
Chief Executive Officer

Grindrod Limited – Disclaimer: The market value of the fleet is based on valuations obtained from ship brokers and published market information on ship charter rates. These values and rates are subject to risks and uncertainties, as various factors beyond the control of the group may cause values to fluctuate materially subsequent to the date of this announcement.