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Overview

Grindrod Limited generated earnings of R873 million for the year ended 31 December 2009 (2008: R2 157 million), down 60% on the extraordinarily high prior year earnings. Headline earnings per share decreased by 63% to 190 cents per share (2008: 512 cents) compared with the prior year including large headline earnings adjustments. Total ordinary dividends at 60 cents per share for the year decreased by 56% from 136 cents per share. A final dividend of 30 cents per ordinary share (2008: 68 cents) was declared. Dividend cover reduced to 3,2 times earnings from the 3,5 times cover generally applied in the past and a preference share dividend of 428 cents per share (2008: 623 cents was declared). Return on ordinary shareholders’ funds was 15,9% (2008: 50,2%).

Headline earnings per share (cents) Dividends/distribution per share (cents)

These results were recorded against the backdrop of a major global recession characterised by volatility and uncertainty in financial, commodity and shipping markets, low trade volumes, softer commodity prices and increased credit and counterparty risk. This environment brought to an end an extended period of extraordinarily strong drybulk shipping markets, although there was an improvement in the second half of the year, mainly due to strong commodity demand from China.

In reaction to market conditions, Grindrod prepared for a difficult year focusing efforts on key operational areas by:

  • protecting the balance sheet and ensuring sufficient liquidity through maintaining high levels of contract cover, managing counterparty risk, selectively selling ships to lock-in value and generate cash, and ensuring adequate finance facilities;
  • reducing costs and improving efficiencies to support the earnings base; and
  • protecting customer relationships.

These actions, together with the fact that the group did not materially expand its fleet at the top of the market, culminated in a strong balance sheet with minimal debt, more than adequate liquidity through cash resources and access to financing facilities, a low cost fleet with options to extend or purchase and contracts with reliable counterparties.

The strategy to diversify the group from shipping to a broader based freight and logistics business supported group earnings during the year.

2009 Attributable income by division 2008 Attributable income by division

(Prior year numbers have been restated due to the adoption of IFRS 8 Operating Segments.)

Shipping earnings declined by 74% from R1 862 million to R492 million on the back of the decline in shipping rates, triggered by the lack of credit to support international trade and the slowdown in major economies and lower profits from ship sales. The division was further impacted by foreign exchange losses due to a strong closing Rand/US Dollar exchange rate compared to a large gain in the prior year. The group has put in place measures to reduce its exposure to shipping market volatility.

The Trading division’s earnings grew from R132 million to R181 million in 2009, an increase of 37% due to increased volumes, good operating margins and reduced funding costs.

Despite the impact of tough trading conditions particularly within the logistics operations, Freight Services reported growth in earnings of 18% with profits of R222 million compared to R189 million in the previous year. Strong performances from Ports and Terminals, as a result of investment in terminal capacity in prior years. Seafreight, Intermodal and Ships Agencies were key in achieving this result.

Financial Services experienced growth in earnings of 3% from R35 million to R36 million with commendable performance across key portfolios and improved fee income in a challenging environment.

As previously reported, the majority of Grindrod Freight Services’ South African based businesses, operating through the subsidiary company Grindrod (South Africa) (Pty) Limited, became black economic empowered in the first quarter of 2009. The finalisation of the empowerment transaction, combined with other BEE initiatives, resulted in Grindrod (South Africa) (Pty) Limited achieving a level 3 BEE rating.

Included in the group costs above is a once-off R21 million (or 5 cents per share) IFRS 2 charge against headline earnings for the BEE transaction.

Capital expenditure and commitments

Description Capital expenditure Capital commitments
R millions 2009 2010 2011 2012 Total commitments
Ships 794 858 635 85 1 578
Property and terminals 236 436 63 499
Vehicles, equipment and software 159 34 5 1 40
  1 189 1 328 703 86 2 117
Acquisition of businesses 219 176 6 182
Total 1 408 1 504 709 86 2 299

Major items of capital expenditure for the year included instalments paid under the group’s ship newbuilding orders, the expansion of Freight Services drybulk terminal capacities in Richards Bay and Maputo, expansion of automotive storage facilities in Rosslyn, Pretoria, the re-entry into the rail sector through the establishment of RRL Grindrod and the acquisition of a locomotive maintenance and refurbishment operation.

Ship newbuilding contracts make up the bulk of the capital commitments. In addition to the capital commitments of R2,3 billion the group has budgeted for further capital expenditure of R2,7 billion over the next three years, mainly in Freight Services and has the balance sheet capacity for a further R4 billion over the same period.

Subsequent to year end, orders of a further three small product tankers, included in commitments above, were cancelled. Management are, however, in discussions with the shipyard on the possible renegotiation of these contracts.

Cash flow and borrowings

Cash generated from operations was R918 million (2008: R3 353 million). Cash outflows included capital expenditure of R1 408 million and dividends of R540 million during the year. This resulted in the net cash position of R325 million at 31 December 2008 becoming a net debt position of R258 million at 31 December 2009 and a net debt:equity ratio of 4%. Net interest costs at R91 million, although decreasing by 48% from R175 million, remain material due to low interest earned on substantial US Dollar cash resources while interest costs were incurred on Rand debt. This position was prudent to ensure availability of US Dollar capital to fund expansion opportunities and is likely to reduce during the current year.

The group is confident that it has adequate funding available for all capital commitments through its cash resources, cash generated from operations and existing committed bank facilities.

Net cash/debt analysis

Shareholders equity

Shareholders’ equity decreased from R6,7 billion at 31 December 2008 to R5,7 billion at 31 December 2009 due to the effect of the stronger Rand/US Dollar exchange rate and the revaluation of hedging instruments.

During the period, 19 044 230 ordinary shares and 100 000 preference shares, held by a subsidiary company, were delisted. The balance of 9 179 348 ordinary shares repurchased in prior years continue to be held in treasury.

2009 Attributable income by division Net debt/EDITDA

Divisional reviews

Shipping

An analysis of the divisional results is as follows:

             
    Bulk carriers Tankers 2009 2008 Growth
  Profit from owned and long-term chartered ships Handysize Panamax Capesize Mid-range Small Chemical Total Total %
  Average number of owned/long-term chartered ships 17,3 2,0 2,9 7,8 0,7 4,0 34,7 36,7 (5) 
  Average daily revenue (US$) 13 000 20 800 26 900 18 300 8 200 14 800 15 900 28 600 (44)
  Average daily cost (US$) 8 500 9 400 18 900 14 600 10 400 14 600 11 500 11 700 2
  Profit (US$ million) 28,3 8,3 8,3 10,5 (0,7) 0,3 55 226 (76)
  (US$ million)                  
  Profit from ship operating activities             31 39 (21)
  Profit from ship sales             31 62 (50)
  Shipbuilding costs             (7)
  Overheads/other expenses             (28) (35) 20
  Foreign exchange (loss)/profit             (5) 16 (131)
  Funding costs/preference dividends/taxation             (17) (44) 61
  Impairments/onerous contract provisions             (42) 100
    60 222 (73)

The contract cover and efficient ship operation during the major collapse in shipping markets ensured earnings outperformed market rates. However, the lower earnings levels against a relatively fixed cost base resulted in an erosion of margins.

After a very poor first quarter, drybulk markets performed better than initially anticipated due to strong Chinese commodity demand, combined with the delivery of only approximately 60% of the 2009 newbuilding order book.

Average spot rates in the markets in which the group operates were in excess of 60% lower than the prior year.

The division took the opportunity to reduce its exposure and effected the following transactions:

  • Exercised five purchase options, one of which was in a joint venture company, and onsold four of these ships to third parties thereby taking advantage of recovering freight rates and asset values to extract value from these options.
  • Three owned ships, one from a joint venture company, were sold.
  • A long-term charter-in of a chemical tanker scheduled for delivery in 2012 was cancelled.
  • Two newbuilding product tankers were cancelled due to yard non-performance.

These actions resulted in a decrease in the number of ships operated during the year when compared to the previous year.

The division was further impacted by shipyard delays and non-performance issues. The associated costs of US$7 million are disclosed above.

Provisions for onerous contracts on the drybulk shipping business reduced from US$28,3 million at the end of 2008 to US$14,3 million at 31 December 2009, but there were no significant adjustments to impairments.

Ship operating activities, which are not reliant on long-term fixed-cost time charters or owned ships, performed well during the year. The revenue of these businesses is generally linked to their costs, thereby ensuring reasonable margins notwithstanding the level of the market. Volumes were, however, lower than the prior year due mainly to very low demand in the first quarter.

Fleet overview (owned and long-term chartered ships)

         
  Contracted in at Bulk carriers Tankers  
  31 December 2009 Handysize Panamax Capesize Mid-range Small Chemical Total
  2010 Number (average)
Cost (US$/day)
15,1
9 200
2,0
9 400
3,0
21 000
8,1
15 300
3,0
10 400
4,0
14 700
35,2
12 400
  2011 Number (average)
Cost (US$/day)
16,9
9 400
2,0
9 400
3,5
26 200
5,2
13 700
6,2
10 800
4,0
14 700
37,8
12 400
  2012 Number (average)
Cost (US$/day)
18,1
9 800
2,0
9 400
3,0
27 800
4,0
13 000
8,5
11 000
4,0
14 700
39,4
12 200
  2013 Number (average)
Cost (US$/day)
18,5
9 900
2,0
9 500
3,0
28 100
4,0
13 200
8,5
11 100
4,0
14 800
40,0
12 300
  Current fleet 15 2,0 3,0 8,0 1,5 4,0 33,5*
  Net number of ships to deliver              
  2010 1,0 (1,0) 3,0 3,0
  2011 2,0 (3,0) 4,0 3,0
  2012 0,5 0,5
  2013
  Fleet at end of 2013 18,5 2,0 3,0 4,0 8,5 4,0 40,0**
* Owned fleet 7,5; chartered fleet 26
** Owned fleet 23,5; chartered fleet 16,5

The group has reduced its committed fleet from the 51 previously reported to 40 in the current year with the option to redeliver to owners ten of these chartered ships by the end of 2013 (should this be warranted by market conditions).

       
  Market value adjustments to fleet book value R millions Comments
  Excess of market value of owned fleet and charters with purchase options over book value 241 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  558 Differential between market rates and Grindrod charter/contract rates.
(PV @ 6.5%)
    799  
       

Assumptions used in the market value adjustment calculation above are set out below. In some cases these are below book or contracted values, however further impairments have not been required as value-in-use calculations justify the carrying values.

  Average ship market value US$000 Average market long-term charter rates US$ per day  
  Bulkers – Handysize   23 864 12 750  
    – Handymax 33 750 16 511  
    – Panamax 37 500 17 128  
    – Capesize 66 500 31 031  
  Tankers – Mid-range   22 500 12 996  
    – Small 18 441 9 750  
    – Chemical 33 250 20 000  

Contract cover and contracted profits


         
  Contracted out at Bulk carriers Tankers  
  31 December 2009 Handysize Panamax Capesize Mid-range Small Chemical Total
  2010 Number (average)  11,8  2,0 2,5  7,1  1,5  2,0  26,9 
    Revenue (US$/day) 10 800 22 600 35 100 19 300 10 400 17 000 16 600
  2011 Number (average)  3,0  2,0 2,3  1,7  1,1  1,5  11,6 
    Revenue (US$/day) 11 800 24 000 42 100 19 600 10 600 17 600 21 700
  2012 Number (average)  1,8  2,0 2,0  –  5,8 
    Revenue (US$/day) 12 900 24 000 44 500 27 700
  2013 Number (average)  0,5  1,4  1,0  2,9 
    Revenue (US$/day) 20 000 25 200 52 300 33 600

  Contract profits % of fleet fixed Charters (US$m) Ship sales (US$m) Total (US$m)
  2010 76 43 43
  2011 34 30 30
  2012 17 24 24
  2013 8 15 15
  In addition, ±6% of fleet is fixed for 2014/2015
   

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

Given that drybulk shipping makes up less than half of group profits as well as the high level of contract cover, the Baltic Dry Index (“BDI”) is not considered a reliable measure of Grindrod’s performance and prospects.

Drybulk market

The drybulk market experienced an all-time low at the beginning of 2009 with an upward correction towards mid-year. The company’s primary market, the smaller handysize vessels, was far more stable with rates generally improving steadily throughout the year.

The outlook for the market for 2010 remains uncertain due to the large order book, particularly in the capesize sector, a large portion of which is, however, not expected to deliver. A key factor is whether China’s strong demand for commodities will continue to grow during 2010. Notwithstanding the above, the handysize sector is not faced with the same oversupply concerns.

The consensus view is, however, that the drybulk market will face a further softening during 2010 due to the oversupply of vessels. This is reflected in the longer-term market rates set out below. The company’s low fleet cost and contract cover should result in reasonable profit levels from its drybulk shipping activities.

Bulk carrier spot earnings (Baltic exchange series) (US$/day)

Current spot, one and three-year time charter rates at date of drafting this report, and a comparison of average spot rates, are as follows:

          Average spot rates
    Spot rates
 (US$ per day)
One-year time charter rates
(US$ per day)
Three-year time charter rates
(US$ per day)
2009
 (US$ per day)
2008
(US$ per day)
  Handysize 17 613 15 000 12 500 11 342 29 282
  Panamax 29 417 26 500 19 500 19 295 49 014
  Capesize 40 307 40 000 31 000 42 656 106 025
             

Tanker market

The product tanker market was adversely affected in 2009, particularly due to the recession in the developed world which is the major consumer of petroleum products. A late correction and support for tanker freight rates was seen in the fourth quarter due to the extremely cold northern hemisphere winter.

The short-term outlook for tanker freight rates is flat as a result of expected slow demand growth. The medium to longer-term outlook indicates that oil demand will again increase, supported strongly by growth in the eastern developing markets. This is reflected in the longterm charter rates set out below.

Clean product tanker 30 000 – 38 000 dwt spot earnings for selected routes (US$/day)

Clean product tanker 30 000 – 38 000 dwt spot earnings for selected routes (US$/day)

Current spot, one and three-year time charter rates at the date of this report, compared to average spot rates, are as follows:

          Average spot rates
    Spot rates
(US$ per day)
One-year time charter rates
(US$ per day)
Three-year time charter rates
(US$ per day)
2009
(US$ per day)
2008
(US$ per day)
  Mid-range 11 216 13 000 13 500* 7 697 23 325
  Small Not available 9 250 9 250* 11 500 14 500
             
   
*   Three-year time charter rates based on management assessments.
  Meaningful rates for chemical tankers are not available.

Ship values

The trend in drybulk and tanker asset values have diverged, with drybulk asset values improving since January 2009 whilst the tanker asset values have declined. The tanker values, however, appear to have reached the bottom of the cycle as increased sale and purchase activity is seen in this market. Owners with cash resources are now beginning to look to acquire well priced and more modern tankers.

The drybulk market on the other hand has shown resilience throughout 2009 with ships of all sizes being traded consistently throughout the year. Scarcity in financing remains a serious constraint for the shipping industry as banks continue to deal with loan to value concerns.

Ship values in both the wet and dry markets are not expected to change materially from current levels in the medium-term.

47 000 dwt D/H Tanker – Second hand prices (5 year) – US$ millions
Bulk Carrier – Second hand prices (5 year) – US$ millions

Divisional outlook

The Shipping division has taken the opportunity to lock-in some value on time charteredin ships which had purchase options. This reduced market risk to the group and further improved cash resources.

This places the division in a strong position to consider opportunities that may present themselves in the current year.

The Shipping division has a young and low cost fleet, sound contract cover, a strong balance sheet and reliable counterparties.

Trading

In spite of gross revenue declining by 15% due to generally softer commodity prices, volumes were up 7,7% to 7,09 million tonnes (2008: 6,59 million tonnes) mainly through strong performances by the marine fuel and agricultural businesses. Operating margins improved while the average operating margin per tonne was maintained at approximately US$4 per tonne. In addition, there was a benefit from lower interest charges.

The acquisition of the remaining 50% interests in the marine fuel and industrial raw materials trading businesses during 2008 had little impact on earnings growth.

The establishment of a trading hub in Singapore has created a platform for the division to benefit from exposure to the Asian markets. Liquidity issues arising from the credit crisis in 2008 have eased but counterparty risk remains a key focus.

Agricultural

All agricultural commodity markets were characterised by continued volatility. Whilst supply and demand still drives market movements, these are exacerbated by hedge fund activity. This has created opportunities for Atlas to improve its offering to customers by strengthening key customer and supplier relationships and simultaneously enhancing margins through innovative distribution channel management with resultant efficiencies.

Plans for 2010 should result in further improvements. Growth will come from focusing on the core strengths of the business encompassing regional exposure and expertise, strategic alliances, new products and expansion into new markets.

Marine fuel

Market conditions remain challenging with some key participants suffering the ill effects of counterparty exposure. Despite this, Cockett performed exceptionally well through focused efforts on physical supply of marine fuels, penetration into new markets, volume growth and sound counterparty risk management.

Commodity prices have risen steadily with crude oil rising from US$42 to US$79 per barrel (90%) over the course of 2009.

The prospects for 2010 are sound. Cockett continues to identify and develop niche trading opportunities which are expected to increase volumes through new market and physical supply programmes.

Industrial raw material

Steel production fell early in the year and then recovered, particularly in China where production ended the year 12% higher than 2008. The same pattern was evident in stainless steel, where Chinese production increased by over 27% in 2009 on the back of strong demand. Oreport’s involvement in steel and stainless steel is changing from that of pure trading, where opportunities are declining, to that of a distributor with stakes being taken in warehousing and processing companies which will develop both opportunities and margins.

China showed increased demand for manganese and chrome alloy markets despite the reduction in global demand. Prices of manganese alloys increased during the year although chrome only improved about 10%. Coal prices were subdued for most of the year and opportunities limited. Oreport was severely affected by the strong Rand and supplier cutbacks. However, recent improvements have led to additional opportunities to expand its business.

The ongoing demand for raw materials in China offers Oreport the opportunity to refocus given the relatively poorer conditions in other parts of the world. Supplier support coupled with strong market contacts allow for continued profitability and growth. To support this Oreport has opened an office in Singapore with plans to expand this footprint to other developing markets which is expected to enhance trading opportunities.

Divisional outlook

The focus for 2010 will remain on sourcing and investment in strategic origination projects and expanding the offering of products across the division. Representation in new markets, particularly in South America, Asia and in the rest of Africa, have commenced.

Sound management of counterparty exposure and market risk remain imperative.

Whilst testing trading conditions are anticipated for 2010, earnings levels should be maintained.

Freight services

Attributable income reflects a combination of strong growth in the ports and terminals operations and resilient contributions from the intermodal, ships agencies and seafreight operations in very difficult market conditions.

Logistics

The logistics operations, primarily in the transport segment, came under severe pressure in 2009 from depressed market conditions in the minerals, agricultural, automotive and durable goods sectors, trading significantly below expectations. The transport operations were rationalised and restructured in the light of lower market volumes and are expected to return to profitability in 2010. In the automotive sector, the award of additional tenders combined with the exit of a number of competitors, has resulted in growth of market share, which places the business in a stronger position to benefit from a recovery of this market.

Ports and terminals

The terminal operations, although impacted by rail delivery issues, traded largely in line with expectations, benefiting from the expansion of terminal capacities, improved operating efficiencies and a good contract base. The expansion of the Matola Coal Terminal export capacity from 2 million to 4 million tonnes per annum was completed in May 2009, with the further expansion of the terminal capacity to 6 million tonnes currently in progress and scheduled for completion in the fourth quarter of 2010. The expansion of the Richards Bay drybulk export and import capabilities to a combined 6,4 million tonnes per annum was completed in the second quarter of 2010, with the addition of a total of 3,4 million tonnes of handling capacity.

Despite global trade volumes and port throughput declining in 2009, the Maputo Port Development Company (“MPDC”) performed robustly with a 5,8% growth in volumes to 8,03 million tonnes handled through the Port. Profitability at MPDC improved due to this volume growth combined with improved operational efficiencies.

Intermodal

The intermodal business was restructured for lower volumes, however, it expanded its customer base. Consequently it was able to continue to perform well in a challenging environment.

Seafreight

Seafreight, although negatively affected by declines in freight rates and container volumes, has maintained profitability over the prior year through the negotiation of lower charter rates on vessels, fleet reductions, improved scheduling integrity and general operational efficiencies.

Ships Agencies

Ships Agencies performed well in a difficult trading environment which was further impacted by the strong Rand/US Dollar exchange rate. In particular, liner shipping operator volumes were extremely low and they were forced to amend sailing schedules and in some cases withdrew from destinations they had serviced for many years.

Rail

Grindrod re-entered the rail sector, after divesting its interests in Sheltam Grindrod in 2008, through the conclusion of a 50% joint venture agreement with Solethu Investments during the first quarter of 2009. This culminated in the establishment of RRL Grindrod and RRL Grindrod Locomotives, level 1 and level 3 BEE contributor status companies respectively. Collectively they provide locomotive leasing, rail operations and shunting services. Later in the year, the business was supplemented through the acquisition of a business specialising in the maintenance and refurbishment of locomotives and wagons, thus broadening the depth of the locomotive service offering. The business is now well placed to grow organically and participate in public-private partnerships and concession opportunities as they become available.

Divisional outlook

A gradual improvement in market conditions is expected, with tentative signs of recovery being evident. Management anticipate the following key trends:

  • The logistics business segment is expected to return to profitability by the second half of 2010, benefiting from a more appropriately structured operating platform, now realigned to lower market demand combined with an increase in market share in the automotive transportation sector;
  • Continued improvement in demand for export capacity through ports and terminals on the back of the recovering global commodities market. Additional capacity coming on-stream in the terminals, supported by guaranteed throughput commitments from customers, is expected to result in strong growth in 2010, provided sufficient rolling stock becomes available;
  • Intermodal and ships agency operations traded well in the second half of 2009, with this trend expected to continue into 2010 aided by the anticipated moderate economic recovery. Seasonality in these businesses is expected to become more pronounced compared to previous years, with the second half of the year expected to be typically stronger than the first half;
  • Seafreight volumes are expected to remain under pressure for the first half of 2010. However, if port operational challenges are managed, the business should continue to benefit from the ongoing cost saving initiatives and improved scheduling integrity; and
  • The rail operations are well placed to take advantage of public-private partnerships, concessioning and branch line concessioning opportunities should they arise. The operations should also benefit from the expected continued strengthening in demand for commodities.

Financial services

Attributable earnings increased by 3% due to strong fee income growth from property finance and corporate banking and no bad debt exposure.

Levels of assets under management were maintained in a very difficult market and the performance of the private client portfolios and unitised funds has been commendable. The newly launched unit trust fund, the Grindrod Global Property Income Fund, exceeded expectations for the period with an annualised return on investment of over 50%.

Credit and liquidity continue to be conservatively managed. Deposits were at record high levels which resulted in a healthy liquidity surplus at 31 December 2009. This positions the Bank favourably to seek well priced lending. The Bank’s capital adequacy ratio at 14,2% remains comfortably above the Basel II requirements.

The Bank continues to expand its operations in Durban, Cape Town and Johannesburg with a focus on employing highly skilled staff. Particular attention has been given to growing the Bank’s corporate finance capability.

Divisional outlook

The adverse operating environment for financial service entities is expected to continue in the first half of the year. As a result, the Bank will mainly focus on opportunities to earn fee income rather than growth in advances. It will also maintain its conservative liquidity, credit and asset management policies to ensure its clients are well serviced and their risks well managed.

Basic 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 as amended and the JSE Listing Requirements. They are consistent with those applied in the previous year with the exception of the revised IAS 1 Presentation of Financial Statements and IFRS 8 Operating Segments which were adopted in the current year. The condensed cash flow for 2008 has been restated due to reallocation in relation to IAS 7 Cash Flow Statements. The adoption of these new standards has resulted in certain disclosure reclassification, but has not resulted in any changes in accounting policy.

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.

Prospects

The global and local economies are in the process of recovering from the severe recession which was at its worst in the first half of 2009. The improved economic activity, mainly driven by growth in China and India, has led to increasing commodity demand, generally higher commodity prices and a substantial rise in trade volumes. It is anticipated that all divisions will benefit from the improving cycle.

There is some concern that the large number of new drybulk ships due for delivery in the short-term could adversely affect the drybulk shipping market and consequently the results of the Shipping division notwithstanding the benefit of improved demand for commodities.

The outlook for the Freight Services operations is favourable, with the business expected to benefit from an increase in volumes handled at the recently expanded drybulk terminals. Trading and Financial Services should at least maintain their performances.

The group results are extremely sensitive to the Rand/US Dollar exchange rate and continued strength of the local currency will impact negatively on earnings.

No ship sales are planned for 2010 at this time. However, the group could benefit from well timed use of its strong balance sheet to expand operations.

In spite of the uncertainties above, management expects to achieve continued acceptable returns on shareholder funds for 2010.

For and on behalf of the board

I A J Clark A K Olivier
Chairman Chief Executive Officer

Audit option

The auditors, Deloitte & Touche, have issued their opinion of the group’s financial statements for the year ended 31 December 2009. 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.

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.

Clarkson Research Services Limited – Disclaimer: The information supplied herewith 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 Studies.

The statistical and graphical information contained under the heading is drawn from the Clarkson Research Services Limited (“CRSL”) database and other sources. CRSL has advised that: (i) some information on its CRSL’s database is derived from estimates or subjective judgments; and (ii) the information in the databases of other maritime data collection agencies may differ from the information in CRSL’s database; and (iii) whilst CRSL has taken reasonable care in the compilation of the statistical and graphical information and believes it to be accurate and correct, data compilation is subject to limited audit and validation procedures and may accordingly contain errors; and (iv) CRSL, its agents, officers and employees do not accept liability for any loss suffered in consequence of reliance on such information or in any other manner; and (v) the provision of such information does not obviate any need to make appropriate further enquiries; (vi) the provision of such information is not an endorsement of any commercial policies and/or any conclusions by CRSL; and (viii) shipping is a variable and cyclical business and any forecasting concerning it cannot be very accurate

References for Shipping market data: Clarkson Research Services Limited
  ACM Research