Audited results and dividend announcement
for the year ended 31 December 2008

Comments
for the year ended 31 December 2008

OVERVIEW

Grindrod Limited generated earnings of R2,157 billion for the year ended 31 December 2008 (2007: R1,195 billion), up 81% on the prior year, while headline earnings per share increased by 95% to 512 cents per share (2007: 263 cents). The difference between earnings and headline earnings is largely attributable to impairment of ship values. Ordinary dividends per share for the year have increased by 74% with a final dividend of 68 cents per ordinary share (2007: 44 cents). The board also declared a preference share dividend of 623 cents per share (2007: 550 cents). Return on ordinary shareholders’ funds was 50,2% (2007: 50,8%).

Divisional earnings 2008 2007 Comments
Shipping (US$ millions)      
Profit from owned and long-term chartered ships 226 160 Increased shipping rates
Profit/(loss) from ship operating activities 39 (14) Expansion of operations and improved performance
Profit from ship sales 62 27  
Overheads/impairments/provisions (105) (35) Increased onerous contract provisions/impairments
  222 138  
Total Group (R millions)      
Shipping (US$ profit converted to Rands) 1 794 982  
Trading 129 63 Increased shareholding/improved profitability
Freight Services 198 114 Improved volumes/growth in activities
Financial Services 36 36 Shareholding reduced to 81,1% in June 2007
Earnings attributable to ordinary shareholders 2 157 1 195  

The tanker market remained largely stable in the past year, however, both record highs and all time lows were experienced in drybulk shipping markets. The effects of the credit crisis impacted on the global economy, resulting in significant reduction in shipping activity. In spite of this, Shipping continued to be the major profit contributor at 83% of total earnings. This was mainly due to the high level of contract cover, increased tanker and drybulk earnings, profits earned on ship sales and the benefit from a weaker Rand/US Dollar exchange rate.

These results include a substantial charge in respect of ship impairments, onerous contracts, once off taxation as a result of a restructure within the Shipping division and increased STC charges.

Trading had an excellent second half, which resulted in earnings growth of 105% for the year. Freight Services experienced strong growth in earnings of 74%, particularly from Terminal and Intermodal activities. Financial Services results were impacted by the reduced shareholding as a result of the empowerment transaction, declining equity markets and the slowdown in local economic activity but nonetheless achieved the same earnings as the previous year.

SHAREHOLDERS’ EQUITY

Shareholders’ equity increased from R3 378 million at 31 December 2007 to R6 713 million due to the strong earnings, the effect of the weaker Rand/US Dollar exchange rate and the revaluation of hedging instruments as required in terms of IAS 39.

During the year, the group repurchased 8 776 542 ordinary shares at an average price of R23,41 and a total of 100 000 preference shares at an average price of R95,34. The treasury shares are held by a subsidiary.

Return on ordinary shareholders’ funds (%)

CASH FLOW AND BORROWINGS

Cash generated from operations was R4 312 million, a growth of 126% over the 2007 year. Cash outflow included capital expenditure of R2 158 million and dividends paid of R607 million during the year. This resulted in net borrowings decreasing from R981 million at 31 December 2007 to a net cash position of R325 million at 31 December 2008. The higher Rand interest rates increased the net interest charge by 34% to R175 million. There was very little benefit from interest earned on US Dollar cash resources but the group’s balance sheet benefited through the weaker Rand/US Dollar exchange rate. The group’s debt: equity ratio improved from 29% to a surplus net cash position of 5%.

The strong balance sheet, favourable liquidity position, high level of contract cover and low cost fleet provides a platform for the group to conclude investment opportunities at the appropriate time.

CAPITAL EXPENDITURE AND COMMITMENTS

Description Capital expenditure Capital commitments
          Total
R million 2008 2009 2010 Thereafter commitments
Ships 1 309 1 377 914 572 2 863
Property 3
Terminals 236 182 113 295
Vehicles and equipment 276 69 69
  1 824 1 628 1 027 572 3 227
Investment in new businesses 334 19 19
Total – authorised and contracted 2 158 1 647 1 027 572 3 246

These commitments will be funded by cash resources, cash generated from operations and committed bank financing facilities.

SHIPPING

The Shipping division had an exceptionally strong performance in 2008 with attributable income up 83% on 2007. Earnings from tankers increased due to revenue contracted at favourable rates and an increased fleet. Drybulk earnings more than doubled mainly as a result of significantly higher earnings on the chartered-in handysize bulk carriers open to the spot market. The division also benefited from profits on ships sold.

All shipping operations, including the Parcel Service, tanker operating and the new bunker tankers and handymax businesses performed well.

Income statement 2008 2007 Growth  
  Rm Rm % Comments
Revenue 7 069 4 374 62 Higher spot rates/contract cover
EBITDA 2 367 1 135 109  
   – tankers 690 372 85 Increased fleet/ship sales
   – drybulk 1 677 763 120 Higher spot rates
Operating income 2 272 1 035 120 Higher revenue/cost base similar to 2007
Attributable income 1 794 982 83  
Margin (%) 32 24 33 Higher spot rates

EBITDA Contributions

The drybulk shipping market experienced the sharpest drop in history during the fourth quarter of 2008. This significant drop in both earnings levels and asset values was triggered by the credit crisis which resulted in the lack of credit to support international trade. Markets have been further impacted by a slowdown in major economies.

Profit on sale of ships was up from R193 million (US$27 million) in 2007 to R502 million (US$62 million) in 2008. Impairment of some drybulk ship values and provisions against onerous charter contracts amounted to R341 million (US$42 million) as a result of the change in the market outlook. This results in total impairments and provisions in the balance sheet at year end amounting to R435 million (US$46 million). Five ships were sold to take advantage of the high ship values at the time.

An analysis of the profit by ship category is as follows:
      Bulk carriers       Tankers     2008 2007
    Handysize Panamax Capesize   Mid-range Small Chemical   Total Total
Average number of owned/long-term chartered ships 18,2 2,0 4,2   7,2 1,1 4,0   36,7 38,0
Average daily revenue (US$) 31 600 20 600 47 700   20 800 6 000 19 000   28 600 23 000
Average daily cost (US$) 9 100 9 400 20 300   13 700 3 600 14 350   11 700 11 400
Profit (US$ millions) 149,4 8,3 42,1   18,8 0,9 6,8   226 160
(US$ millions)                    
Profit from owned and chartered ships                 226 160
Profit/(loss) from ship operating activities                 39 (14)
Profit from ship sales                 62 27
Overheads/profit share expense (includes exceptional item of US$12 million)                 (35) (26)
Impairments/onerous contract provisions                 (42)
Forex/funding costs/taxation (includes exceptional item of US$8 million)                 (28) (9)
Attributable earnings                 222 138
Converted to Rands (millions)                 1 794 982

The following transactions were concluded during the year:
Ships delivered Ships ordered Ships sold/redelivered Contracted sales
1 x 40 000 dwt products tanker 2 x 32 000 dwt handysize bulk carriers 2 x 12 800 dwt products tankers (sold on delivery) 1 x 6 155 dwt products tanker
1 x 16 500 dwt products tanker (50% owned) 1 x 52 378 dwt supramax bulk carrier (2-year charter) 1 x 28 424 dwt handysize bulk carrier (chartered ship sold) 1 x 40 000 dwt products tanker
2 x 12 800 dwt products tankers (sold on delivery)   2 x 34 700 dwt handysize bulk carriers (sold) 1 x 40 000 dwt products tanker (50% owned)
1 x 32 260 dwt handysize bulk carrier (long-term charter – 50%)   2 x 170 000 dwt capesize bulk carriers (chartered ships redelivered)  
1 x 29 600 dwt handysize bulk carrier (long-term charter)      

During the year an option to purchase a chartered handysize bulk carrier was exercised.

FLEET OVERVIEW (owned and long-term chartered ships)

Contracted in at 31.12.2008 Bulk carriers   Tankers    
    Handysize Panamax Capesize   Mid-range Small Chemical   Total
2009 Number (average) 19,0 2,0 3,0   8,3 3,9 4,0   40,2
  Cost (US$/day) 9 200 9 400 19 900   14 100 8 100 14 700   11 400
2010 Number (average) 17,1 2,0 3,0   8,4 6,5 4,0   41,0
  Cost (US$/day) 9 300 9 400 20 100   14 800 9 900 14 700   11 800
2011 Number (average) 15,6 2,0 3,5   6,2 9,3 4,4   41,0
  Cost (US$/day) 8 800 9 400 26 000   14 000 10 200 15 100   12 100
2012 Number (average) 13,0 2,0 3,0   6,0 9,5 5,0   38,5
  Cost (US$/day) 9 100 9 900 27 700   14 200 10 300 14 600   12 400
Current fleet 19 2 4   7,5 1,5 4   *38
Net number of ships to deliver                  
2009 (1,5) (1)   2 3   2,5
2010   (1,5) 4   2,5
2011 (3)   (2) 1 1   (3)
2012 (2,5)     (2,5)
Fleet at end of 2012 12 2 3   6 9,5 5   **37,5
* Owned fleet 8,5; chartered fleet 29,5
** Owned fleet 22,5; chartered fleet 15

In addition to the above, the group has the option to extend the charters or purchase 13,5 chartered ships. This would increase the fleet to 51 ships at the end of 2012.

Daily vessel costs have been reduced by the effect of onerous contract provisions and impairments.

Market value adjustments to fleet book value Rm Comments
Excess of market value over “book value” of owned fleet and charters with purchase options 1 410 Indicative ship values obtained in consultation with reputable ship brokers
    “Book value” of charters = PV @ 6,5% of capital element (i.e. excluding running costs) of charter commitments and purchase option price. Yen options valued at closing rate
     
Market value of other long-term charters and contracts 422 Differential between market rates and Grindrod charter/contract rates. PV @ 6,5%
  1 832  

Note: Based on closing Rand/US Dollar exchange rate of R9,45.

Assumptions used in respect of the group’s fleet in the market value adjustment calculation above are as follows:

  Average ship Average market
  market value long-term charter rates
    (US$m) (US$ per day)
Bulkers – Handysize 21,0 10 000
  – Panamax 32,7 15 000
  – Capesize 51,0 25 000
Tankers – Mid-range 30,4 17 500
  – Small 19,5 13 500
  – Chemical 18,1 n/a
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 date of this announcement.

CONTRACTED PROFITS

Contracted out at 31.12.2008 Bulk carriers   Tankers    
    Handysize Panamax Capesize   Mid-range Small Chemical   Total
2009 Number (average) 9,1 2,0 2,5   6,3 0,9 2,0   22,8
  Revenue (US$/day) 18 000 20 800 29 800   20 000 9 700 17 200   19 700
2010 Number (average) 3,0 2,0 2,1   5,2 0,5 1,5   14,3
  Revenue (US$/day) 16 500 23 400 44 600   20 400 13 300 17 200   23 000
2011 Number (average) 0,5 2,0 2,2   2,0 0,5   7,2
  Revenue (US$/day) 20 000 23 900 43 600   21 700 13 300   28 300
2012 Number (average) 0,5 2,0 2,2     4,7
  Revenue (US$/day) 20 000 23 900 44 350     33 000
        Charters     Ship sales     Total
Contract profits % of fleet fixed   (US$m)     (US$m)     (US$m)
2009   62   68,9     13,9     82,8
2010   41   51,2         51,2
2011   22   33,0         33,0
2012   17   25,0         25,0

In addition, ± 9% of fleet is fixed in 2013/2014

Note: Variable volume contracts have been included at forecast volumes.

As part of the group’s rigorous risk management process, the group continues to maintain a high level of contract cover over its fleet through contracts of affreightment, time charters and freight forward agreements. The group has always been diligent in assessing the creditworthiness of counterparties and will continue to monitor this exposure carefully in the current market.

The group’s contract counterparties are summarised below:

contract counterparties

In addition to the long-term fixed contracts, the group’s ship operating activities, including the Parcel Service have forward contracted to move commodities during the current year. Earnings in 2009 will, however, be impacted by lower volumes.

DRYBULK MARKET

The drybulk shipping market experienced a major deterioration in the fourth quarter of 2008 with volumes, earnings and asset values declining sharply. Earning levels and volumes have, however, recovered significantly albeit off a low base in February 2009, following the Chinese New Year. This recovery is seen as a partial return to normal markets as banks issue letters of credit to support trade and stockpiles are run down.

Asset values have also seen sharp declines (see graph below) with only a few transacted sales over the past months. The lack of liquidity is largely attributable to the lack of ship finance due to the international credit crisis.

The outlook for the drybulk market depends on the world returning to economic growth, which is unlikely in the West in the medium term. The bulk markets, however, are materially influenced by growth in the East, where China and India are still predicting between 5% – 8% growth. This bodes well for drybulk shipping. Linked to this low demand scenario is a large order book particularly in the larger capesize vessels, a number of which deliver during 2009 and 2010. This will further impact the overall drybulk earnings and asset levels. The level of scrapping and the cancellation of newbuilding orders will increase due to the lack of shipping finance and low earnings not supporting the retention of old vessels or the acquisition of vessels on order. This will contribute to more balanced market fundamentals over the medium term.

The handysize bulk sector remains the most fundamentally sound sector within the drybulk market. This fleet is expected to reduce by approximately 10% per annum over the next two years, with scrappings exceeding new deliveries. This is positive for the group as it has most of its exposure to this sector.

Bulk carrier one-year time charter rates

Tanker market

The tanker market, which is driven primarily by oil demand was quite resilient during the last quarter of 2008. This is traditionally a strong quarter for oil demand with increased levels of energy required by the Northern Hemisphere economies. The tanker market, however, began to be negatively affected in the first quarter of 2009 with earnings and asset levels falling. This decline in earnings and asset values in the tanker market has not been anywhere near as dramatic as the reduction in the drybulk market.

The low level of projected growth in demand in the developed markets, (the major users of petroleum products) over 2009 and 2010, could suppress worldwide demand growth. Accordingly, demand growth for petroleum products over the next two years is expected to be flat. In addition, there are a number of newbuilding deliveries anticipated over this period.

The scrapping of single-hulled vessels by the mandatory scrapping date of 2010 will to some extent support the market. Product tanker earnings should, however, be supported from the newly developed refineries in the supply areas which require transportation of their products over longer distances to the demand areas (developed economies).

The overall product tanker market is predicted to be slightly softer over the next two years. Once the order book has delivered and single-hulled vessels scrapped, the market is likely to return to the higher levels of 2007 and 2008.

One-year time charter rates 45 000 – 47 000 modern products

Source:Clarkson Research Services Limited

Ship values

As indicated in the tanker and drybulk commentary above, ship values have declined sharply since the end of the third quarter of 2008. The ship values are not expected to recover to the levels seen in 2008, which were regarded as extraordinarily high due to the high demand for drybulk vessels and shipyard space. Asset values will be softer over the next two years as the market digests the deliveries of 2009 and 2010. Scrapping over this period will, however, increase which will bring some form of equilibrium to the market. Asset values are expected to recover in 2011.

Bulk carrier second-hand prices (five years)

Disclaimer: The information supplied in the Shipping division graphs is believed to be correct but the accuracy thereof is not guaranteed and the company and its employees cannot accept liability for loss suffered in consequence of reliance on the information provided. Provision of this data does not obviate the need to make further appropriate enquiries and inspections. The information is for the use of the recipient only and is not to be used in any document for the purposes of raising finance without the written permission of Clarkson Research Services Limited.

Strategy

The Shipping division has a solid contract base with a young and very low cost fleet. This position will allow the division to generate reasonable shipping returns over what is seen to be a challenging period as the world economy and credit markets recover. Ship contracts are with reliable counterparties and the group will continue to add to this contract base at appropriate levels in the market. The group’s newbuilding orders are at reasonable prices apart from two vessels which have been written down in 2008. The division’s cash and access to shipping finance is more than adequate to meet all commitments and provide for opportunities to expand the fleet should the opportunity arise. However, a cautious approach to expansion will be adopted over the coming period due to the predicted softer market conditions.

TRADING

After performing below expectation during the first half of the year due to the effect of strikes and voyage delays, Trading had a strong second half with solid revenue and operating margin growth. As a result, earnings increased by 105% over the previous year with all three Trading businesses performing well.

Grindrod increased its shareholding to 100% in both Cockett Marine and Oreport Holdings in 2008. These acquisitions now provide a sound base to leverage the skills and relationships within the division and to generate sustainable returns.

Income statement          
  2008 2007 Growth    
  Rm Rm %   Comments
Revenue 24 022 11 334 112   Cockett and Oreport consolidated for nine and
six months respectively. (The acquisitions
generated additional revenue of R6 574 million).
Higher commodity prices during the year, but
softening in the fourth quarter
EBITDA 230 119 93    
Operating income 221 112 97    
Attributable income 129 63 105  

Improved US$/tonne margin

Margin (%) 0,9 1,0    

Operating income in all three businesses improved through focused trading, good position management, improved logistics management and tighter cost control. In agriculture, volume was consciously relinquished in favour of higher margins.

The current focus is to improve operating margins, develop the Asian trading hub, invest in new origination businesses and leverage existing relationships.

There is continued volatility across all markets with weak demand for certain products. In the resources sector continuing production cut-backs in order to firm prices are having limited success. Lack of credit lines and liquidity has had a significant effect on the market. However, the division has been able to maintain its credit lines.

The Trading division continuously manages and monitors its exposure to counterparty and market risks.

Funding requirements have reduced on the back of softer commodity prices and solid cash flows.

The corporate restructure of the division was addressed during the year and a strong management team is in place.

FREIGHT SERVICES

Freight Services reported substantially improved results for the year. Revenues increased by 18%, and operating income by 36%. Terminals and intermodal in particular, produced solid growth on the prior year. The slowdown in motor vehicle and consumer retail sales impacted the performance of Logistics, although it still recorded an improvement on its 2007 results. Ships Agencies once again produced good results.

Income statement          
  2008 2007 Growth    
  Rm Rm %   Comments
Revenue 2 552 2 164 18   Increased volumes in Terminals and
          Intermodal offsetting decline from
          discontinued operation
EBITDA 382 291 31    
Operating income 246 181 36   Improved margins from economies of scale
          and profits on disposals. Losses on disposal of
          a logistics operation in 2007
Attributable income 198 114 74    
Margin (%) 9,6 8,4 14    

Projects

The following significant expansion projects were progressed during the year:

Ports – Maputo Port
  • The port of Maputo master plan outlining the future development of the port will be completed in March 2009 and comprises a strategic plan for the development of the port concession area. The plan provides a framework for berth and channel improvements, development of landside facilities and a review of service corridors and other associated infrastructure. The master plan at this stage covers the proposed development up to 2031. During this period cargo volumes handled through the port are projected to increase to 48,5 million tonnes from the 7,5 million tonnes handled in 2008.
  • Total capital expenditure required to cater for these increased volumes is still in the process of being quantified.
Terminals
  • Matola Coal Terminal’s export capacity increased from 2 million to 4 million tonnes per annum due for completion in March 2009.
  • Richards Bay bulk terminal’s export and import handling capacities increased to 5,1 million and 1,3 million tonnes respectively, with the addition of 2,8 million tonnes of export and 0,6 million tonnes of import capacity. Hot commissioning is scheduled for March 2009.
  • Import facilities enlarged in the Durban drybulk terminal operations with the commissioning of an additional 400 000 tonnes of capacity per annum during the first half of the year.
  • Drybulk handling operations in Walvis Bay enlarged with the addition of 130 000 tonnes of throughput capacity per annum, due for completion in the first quarter of 2009.
  • Completion of the first phase of a planned three-phase development of a car terminal in the port of Maputo with an initial throughput capability of 52 000 vehicles per annum.
  • The joint development of the first of a planned six-phase bulk liquid storage tank farm in the port of Maputo with an initial storage capacity of 10 000 m3.
Logistics
  • Entry into the bulk liquid petrochemical transport market, focusing on cross border transportation, through the acquisition of the business of WM Translogistics in the third quarter and the subsequent expansion of the fleet size to 32 tanker combinations.
  • Expansion of the drybulk transportation fleet by 58 super links to a total of 68 units.

Capital expenditure

Total capital expenditure in 2008 amounted to R513 million, funded from a combination of cash resources and external debt. Authorised capital expenditure for 2009 and 2010 amounts to R485 million and R112 million respectively, the vast majority of which relates to the proposed expansion of the drybulk terminal operations as follows:

  • Maputo coal terminal export capacity from 4 million to 6 million tonnes per annum at a total cost of R334 million, with completion expected by the end of 2010. This additional capacity has been contracted for on a 75% take or pay basis.
  • Richards Bay bulk terminal export capacity by a further 1,2 million tonnes to 6,3 million tonnes per annum with completion expected by the third quarter of 2010 at a total cost R129 million. This additional capacity has also been contracted for on a 75% take or pay basis.

Freight Services has sufficient cash reserves to fund 100% of the capital expenditure approved without the need to raise debt. Third-party funding for R334 million of the contracted expenditure has, however, already been secured.

Disposals

During the course of the year, Freight Services disposed of its interests in the Sheltam Grindrod rail operation.

Subsequent to year end, Grindrod concluded the sale of a 30% interest in the Maputo Car Terminal to Höegh Autoliners, the owner and operator of one of the largest automotive shipping lines in the world. Höegh Autoliners plans to use Maputo as its automotive hub port for the movement of vehicles in the Indian Ocean market.

BEE

Subsequent to year-end, Freight Services concluded a BEE transaction with Calulo Petrochemicals (Pty) Limited (“Calulo”) and Adopt a School Foundation (“AAS”) with the disposal of a 25,1% interest in Grindrod (South Africa) (Pty) Limited (“GSA”). Calulo is a BEE company with interests in the petrochemical sector and is Grindrod’s empowerment partner in Unical (bunker tanker and tanker operating). AAS is a section 21 company that supports the development of schools in previously disadvantaged areas in South Africa. The majority of Grindrod’s 100% owned South African assets fall within GSA.

Grindrod intends re-entering the rail sector through the conclusion of a joint venture, subject to the remaining conditions precedent being fulfilled, which will culminate in the establishment of RRL Grindrod, a 53% black owned company. This business will provide locomotive leasing, rail operations and shunting services to its clients. RRL Grindrod’s intention is to grow its locomotive fleet to support its client base and position itself to capitalise on business opportunities arising from rail restructure in South Africa.

Market outlook

The Freight Services division came under pressure in the fourth quarter of 2008 along with the collapse in commodity and shipping markets, with the worst affected businesses being the Intermodal and Logistics operations. Dry and liquid bulk terminal operations were largely unaffected by the slowdown in the last quarter and are still expected to perform in line with budget in 2009 as the majority of the volumes handled through these facilities are base commodities such as coal, phosrock, clinker, sulphur, fertilizer, vegetable oils and molasses which are expected to be largely unaffected by the global slowdown. Despite current market conditions, volumes through the car terminal in Maputo are expected to increase in 2009 as contracts are concluded with automotive manufacturers to move a portion of their vehicles through Maputo, combined with the benefit of Höegh Autoliners using Maputo as a hub.

Volumes through the Intermodal operations are expected to decline in 2009 along with the downturn in container traffic. Seafreight’s container volumes are expected to decline in 2009. The business will, however, benefit from substantially lower charter rates on vessels and a lower fuel price.

The businesses operating in the durable goods sector (furniture and automotive) are expected to remain under pressure in 2009, with the forecast recovery in the automotive sector only expected in 2010.

FINANCIAL SERVICES

Revenue increased by 25% on the back of strong performances from Corporate Banking, Property Solutions, Investment Products, Treasury and Private Client Services. Credit and liquidity have continued to be conservatively managed which resulted in no bad debts being incurred over the reporting period and a healthy liquidity surplus at year-end. Given the competitive market going into 2008, and the subsequent turmoil in financial markets, advances growth was restricted while deposits increased by 7,9% to R1,52 billion. The resulting liquidity position in excess of R600 million represents 40% of total bank deposits. In addition the Bank’s capital adequacy ratio at 16,5% is comfortably above the requirements for banks as stipulated under Basel II.

During the year the Bank launched its first collective investments scheme, the Grindrod Diversified Preference Share Fund. Investors in the fund benefited from a commendable performance over the year. Grindrod Bank’s Private Client portfolios also showed resilient performance, again underscoring the benefits of long-term and conservative investment management.

Income statement          
  2008 2007 Growth    
  Rm Rm %   Comments
Revenue 94 75 25 Strong performance from corporate banking,
property solutions, investment products,
treasury and private clients services
EBITDA 46 39 18
       
Operating income 45 38 18
Attributable income 36 36

The ongoing global financial crisis, tighter credit, less corporate finance activity and weaker stock markets will make for a difficult operating environment for financial service entities. However, despite these pressures, growth in earnings should be achieved for the 2009 financial year. The Bank will maintain its conservative liquidity, credit and asset management policies to ensure its clients are well serviced and their risks well managed.

BASIS OF PREPARATION

This condensed report complies with International Financial Reporting Standards, as well as with Schedule 4 of the South African Companies Act and the disclosure requirements of the JSE Limited’s Listings Requirements and has been prepared in accordance with IAS 34 Interim Financial Reporting. The condensed report has been prepared using accounting policies that comply with International Financial Reporting Standards. The accounting policies are consistent with those applied in the financial statements for the year ended 31 December 2007, except for the early adoption of the revised IAS 16 (property, plant and equipment) and IAS 7 (cash flow statements). These changes had no effect on the results but there have been some restatement of the prior year disclosures. The full impact of these changes will be disclosed in the annual report.

SUBSEQUENT EVENTS

No material change has taken place in the affairs of the group between the end of the financial year and the date of this report other than the sale of 25,1% of Grindrod (South Africa) (Pty) Limited to an empowerment group as referred to on page 21.

PROSPECTS

The 2008 financial year was an extraordinary year in the group’s history and the outstanding results were achieved mainly through record earnings levels on contracted and spot drybulk ships, profits earned on ship sales and a weaker Rand/US Dollar exchange rate.

In spite of the current economic outlook, earnings growth is anticipated from the Trading, Freight and Financial Services businesses.

The group’s balance sheet strength and favourable liquidity position offer a high level of resilience in these markets and will create opportunities to expand through acquisition.

The credit crisis and the global economic downturn have impacted shipping freight movements and this, together with the anticipated growth in world fleet of ships, is expected to result in continued softer shipping markets in 2009. However, the group will continue to benefit from a high level of contract cover at prices above current spot rates and a low cost fleet of ships. There will nevertheless be a decline in the Shipping division’s profitability.

Consequently, the group expects a reduction in earnings in comparison to the “super profits” achieved in 2008, but still anticipates acceptable returns on shareholders funds in 2009.

This prospects statement has not been reviewed by the company’s auditors.

For and on behalf of the board

I A J Clark A K Olivier
Chairman Chief Executive Officer

AUDIT OPINION

The auditors, Deloitte & Touche, have issued their opinion on the group’s financial statements for the year ended 31 December 2008. The audit was conducted in accordance with International Standards on Auditing. They have issued an unmodified audit opinion. A copy of their audit report is available for inspection at the company’s registered office. The condensed financial statements have been derived from the group financial statements and are consistent in all material respects with the group financial statements.

DECLARATION OF FINAL DIVIDENDS

PREFERENCE DIVIDEND

Notice is hereby given that a final dividend of 623 cents per cumulative, non-redeemable, non-participating and non-convertible preference share (2007: 550 cents) has been declared payable to preference shareholders in accordance with the timetable below.

ORDINARY DIVIDEND

Notice is hereby given that a final dividend of 68 cents per ordinary share (2007: 44 cents) has been declared payable to ordinary shareholders in accordance with the timetable below.

TIMETABLE  
Last day to trade cum-dividend Friday, 13 March 2009
Shares commence trading ex-dividend Monday, 16 March 2009
Record date Friday, 20 March 2009
Dividend payment date Monday, 23 March 2009

No dematerialisation or rematerialisation of shares will be allowed for the period from 16 March 2009 to 20 March 2009, both days inclusive.

The dividends are declared in the currency of the Republic of South Africa.
By order of the board

C A S Robertson

Secretary

25 February 2009

FOR MORE INFORMATION, PLEASE REFER TO OUR WEBSITE AT WWW.GRINDROD.CO.ZA
 
Directors  
I A J Clark* (Chairman), A K Olivier (Group CEO), H Adams*, W D Geach*, I M Groves*, J G Jones, T J T McClure, R A Norton*, D A Polkinghorne, D A Rennie, N Y T Siwendu*, A F Stewart, L R Stuart-Hill. *Non-executive
   
Registered office Transfer secretaries
Quadrant House Computershare Investor Services (Pty) Limited
115 Margaret Mncadi Avenue 70 Marshall Street
Durban Johannesburg
4001 2001
PO Box 1 PO Box 61051
Durban Marshalltown
4000 2107
Sponsor: Grindrod Bank Limited Incorporated in the Republic of South Africa
Registration number: 1966/009846/06 ISIN: ZAE000072328 and ZAE000071106
Share codes: GND and GNDP