With Grindrod’s businesses focused on offering end-to-end commodity supply chain solutions in the movement of liquid bulk, drybulk and containerised and vehicle commodities, a concerted effort was made during the year to remain focused on executing the strategy, managing risks and meeting financial targets.

Notable strategic initiatives to progress the strategy of delivering an integrated freight and logistics service and investing in infrastructure assets and opportunities with high barriers to entry, include:

  • Developing infrastructure to expand the capacity of the Port of Maputo;
  • Increasing the capacity of the Maputo coal terminal;
  • Investing in rail through increasing the locomotive manufacturing capacity and investments in rail technology and concession businesses; and
  • Partnering with Vitol, one of the world’s largest energy trading businesses, in a number of Grindrod’s coal and fuel related businesses to increase access to global markets.

These initiatives, along with a number of others, are positioning the group for further growth.

The group generated earnings of R853,3 million for the year ended 31 December 2012 (2011: R530,9 million), representing a 61% increase on the prior year. Earnings growth on the prior year was achieved in the Freight Services and Financial Services divisions. Trading was up 12% on a comparable basis when adjusting for the sale of 50% of the marine fuels business at the end of
June 2012. Shipping continues to be impacted by the weak shipping markets which necessitated some impairments of the vessels.

Headline earnings per share increased by 22% to 121,9 cents (2011: 99,6 cents). The non-trading items include the profit on sale of a share in the Maputo coal terminal, loss on disposal of 50% of the marine fuels business and the impairment of ships, equipment and goodwill.

Earnings per share is calculated on a weighted average of 590 million shares, up 112 million from the previous year, primarily as a result of the specific issue in November 2011.

A total ordinary dividend of 32,9 cents per share (2011: 29,5 cents per share) has been declared.

* The dividend cover has increased due to the exclusion of capital and non-cash items in calculating the dividend.

The group’s statement of financial position remains sound with total assets of R22,1 billion (2011: R20,4 billion). The net debt:equity ratio is 7% at 31 December 2012 (2011: 10%). Book net asset value per share is R16,09 (2011: R14,54).

Capital expenditure and commitments

Capital expenditure and investments, for the year ended 31 December 2012 amounted to R1 305 million (2011: R1 166 million), of which 85% was expansionary and the balance maintenance or replacement capital expenditure. The capital expenditure comprised payments on two drybulk ships, two tankers, the Maputo coal terminal Phase 3,5 expansion project, locomotives, a rail concession business and coal trading contracts.

Capital commitments Split as follows:
R million 2012 2013 2014 2015+ Total
Freight Services 982 597 84 18 699 442 257
Logistics 219 252 66 318 198 120
Ports and Terminals 189 329 18 18 365 244 121
Rail 574 16 16 16
Trading 203 32 1 1 34 10 24
Shipping 591 470 367 367
Drybulk 359 103 8 111 9 102
Tankers 232 367 367 367
Financial Services 66
Group 7 6 4 3 13 12 1
  1 849 1 105 97 22 1 224 473 751
Split as follows:              
Subsidiaries 1 370 537 89 22 648 461 187
Joint ventures 479 568 8 576 12 564

The group is confident that it has adequate funding for capital commitments through its cash resources and banking facilities.

Cash flow and borrowings

Operating profit before working capital adjustments was R890,2 million (2011: R1 069 million). The group’s working capital position reflects a net inflow for the period of R532,5 million, largely due to the disposal of a 50% interest in the marine fuels business, now treated as a joint venture. Capital expenditure on ships, locomotives and terminals was offset by proceeds from the sale of a 35% interest in the Maputo coal terminal. These movements resulted in the net debt position at 31 December 2011 of R889,7 million decreasing to R745,5 million at 31 December 2012 and the net debt:equity ratio declined to 7% (2011: 10%).

Shareholders’ equity

The total number of ordinary shares in issue is 599 665 314. The 9 179 348 ordinary shares repurchased in prior years continue to be held in treasury. Of these, 2 302 884 shares have been allocated to the group forfeitable share plan, as approved by shareholders at the Annual General Meeting on 30 May 2012.

Divisional operating reviews

Freight Services

Freight Services contributed 93% to the group’s earnings (2011: 60%). Attributable income increased 150% to R793,3 million (2011: R317,8 million) which includes a profit of R414,9 million from the disposal of 35% of the Maputo coal terminal. Trading profit of R364,4 million reflects a 27% growth on the prior year’s trading performance.

The increased earnings were achieved through increased terminal utilisation, rail efficiency improvements and greater market demand in the locomotive manufacturing business. The Maputo coal terminal volume was up 15% at 4,5 million tonnes (2011: 3,9 million tonnes), whilst the port of Maputo handled 15,0 million tonnes of cargo, up 27% on the prior year (2011: 11,8 million tonnes), resulting in strong growth in profitability over 2012.

Ports and Terminals

Ports, Terminals and Rail earnings of R338,2 million from trading activities grew 69% despite product shortages being experienced at the Maputo coal terminal during the first half of 2012.

The Phase 3,5 expansion project to increase capacity by a further 1,3 million tonnes, commenced during April 2012 and is progressing as scheduled with commissioning planned for the second half of 2013. This will increase the terminal’s throughput capacity to 7,3 million tonnes per annum which is fully supported by current rail capacity.

Phase 4 of the Maputo coal terminal project to expand terminal capacity to 20 million tonnes of coal and 10 million tonnes of magnetite ore is progressing according to plan, with feasibility studies having been completed in the final quarter of 2012. The expansion project will involve excavation and land reclamation of 120 hectares, construction of two additional berths, a stockyard and associated railway infrastructure. Grindrod introduced Vitol, one of the world’s largest energy trading businesses, as a 35% strategic partner in the concession.

The rail resource utilisation on the Maputo corridor has improved and Maputo Port Development Company continues to actively pursue further initiatives to increase the Maputo port utilisation.

The rail operations conducted through the RRL Grindrod group of companies experienced strong growth during 2012 with the expansion of the locomotive fleet from 31 to 65 during the year. The most significant new contract secured during 2012 was the construction and lease of an additional 14 locomotives for African Minerals Limited in Sierra Leone, to supplement the 20 already on lease and in operation. Ten were delivered by year-end with the remainder due for delivery in early 2013.

During the second half of 2012, Grindrod acquired a 46,4% interest in New Limpopo Bridge Projects Limited, the 56% shareholder in NLPI Limited, which owns and operates two rail concessions in Zimbabwe and Zambia. Grindrod is participating as the strategic operational partner.


Logistics earnings of R97,8 million were 8% lower than the prior year’s earnings (2011: R106,0 million). The road transport operations were impacted by lower commodity volumes, the commissioning of the Transnet fuel pipeline between Durban and Gauteng in early 2012 and general labour unrest. The business benefited from improvements in operating efficiencies during the latter part of 2012.

During June 2012, Grindrod acquired the remaining 75,5% shareholding in Petrologistics Botswana (Pty) Ltd. This has resulted in the fleet being transferred to Botswana to take advantage of the increased demand in that market. The Fuelogic business also expanded to Namibia during the second half of 2012 and further regional expansion into selected markets in southern Africa is being undertaken.

The strategic relationship with the Calulo group was extended during the year. Röhlig-Grindrod acquired the Calulo group’s clearing and forwarding company, for a 15% shareholding in Röhlig-Grindrod. Additionally, the ships agency of Grindrod and Sturrock merged into a 50:50 joint venture. Both businesses are now level 3 Broad Based Black Economic Empowerment (BBBEE) compliant.


Ports, Terminals and Rail operations are expected to continue to show improved performance in 2013 due to increasing utilisation and operating efficiencies on the back of an expected increase in commodity demand. Rail resource availability and stability of the labour force will remain key critical success factors.

Performance of the Logistics business segment is expected to strengthen during 2013 as volumes improve and greater benefits are extracted from the optimisation of the operations. The South African petrochemical sector is expected to continue to experience some instability as the impact of the new pipeline is fully absorbed by the sector.


The Trading division generated revenue of R27,1 billion (2011: R29,8 billion), a decline of 9% for 2012. Volumes decreased from 8,0 million tonnes in 2011 to 6,1 million tonnes in 2012, impacted by the disposal of 50% of the marine fuels business to Vitol as well as the combination of the coal trading books of Vitol and Grindrod into a joint venture.

The operating margin per tonne was up 17% to US$3,90 (R32,02) in 2012 from US$3,33 (R24,22) in 2011. Earnings were R113,5 million, up 12% on previous year after adjusting for the marine fuels joint venture.

Marine fuels performed exceptionally well, achieving a 35% increase in earnings on a comparative basis, through higher volumes, improved margins and changes to the product mix. The business continues to grow its global presence and secure further supply contracts. The Vitol joint venture concluded during the year provides the business with additional opportunities for growth with a number of initiatives underway.

The industrial raw materials business showed improvement in its core businesses in a difficult and turbulent year for demand, supply and credit availability. The unrest in the mining industry over the past year resulted in the three chrome recovery plants not being operational for over two months of the year. The coal trading joint venture with Vitol, combining the respective sub-Saharan coal trading businesses was concluded during 2012. The business performed well despite the lack of available coal to trade.

The agricultural commodity business had a challenging year impacted by unprecedented volatility in the global markets. The latter part of 2012 saw the development of a new growth strategy for what will be a significant and sustainable integrated value chain agricultural commodity business.


The marine fuels business should see growth in volumes in its physical supply and broking businesses. Growth in volumes in the trading business may be undermined by the lack of credit in the market.

Demand for commodities is expected to be supported by urbanisation in China and India and tentative growth in the United States of America.

The long-term bull market for agricultural commodities remains intact. Demand for grains remains robust and any supply disruption will be met with large price spikes. Increased volume and growth in the agricultural commodity business is anticipated.


The Shipping division’s loss for the year of R169,7 million includes impairments of vessels of R173,3 million. The impairments made are based on value in use, in terms of the accounting policy and recognise the reduced residual value of the ships.

The division’s drybulk business had a steady performance with the panamax ships continuing to generate profits under their fixed income charters, whilst the capesize ships benefited from a high level of contract cover. Losses were made on the handysize vessels due to the poor market and low level of contractual cover during 2012.

The ship operating businesses performed well on the back of steady volumes with the South African coastal tanker operation in particular, having a good year.

The tanker market remained challenging with losses on all sizes of vessels. Earnings on the product fleet improved in the second half of the year under the commercial agreement with Vitol.

As in previous years, average daily earnings achieved were above average spot rates for the year through forward contract cover, operational efficiencies and good pool performances.

During the year, a 28 000 dwt handysize bulk carrier was delivered into a joint venture. In addition, a purchase option on a 32 400 dwt handysize bulk carrier was exercised.

The shipping fleet decreased from 38,5 in 2011 to 36,5 in 2012. Forward contracts on 40% (weighted by revenue) of vessels in 2013 will lock in US$11 million of operating profit with 24% (weighted by revenue) of vessels already under contract for 2014.

Additional contract cover information and a fleet overview are included in the 2012 Additional information for investors and analysts presentation on www.grindrod.co.za.


Commodity demand remains strong and world seaborne trade continues to grow.

The outlook for the dry cargo market remains weak due to the number, albeit reduced from 2012 levels, of new ships delivering into an already oversupplied market. On the positive side, scrapping of older drybulk tonnage continues at historical record levels and there is a sharp drop in newbuilding orders. This is leading in particular on the smaller size ships, to a rebalancing of the supply/demand equation.

There are signs of demand recovery in the products market which is resulting in improved tanker rates.

The owned and long-term chartered fleet had a good level of cover for 2013 which combined with ship operating activities should mitigate against any further market weakness.

Financial Services

Financial Services earnings of R65,1 million represented an increase of 11,5% (2011: R58,4 million). The year’s performance was driven by a strong performance from the Banking division, with both net interest margin and fee income ahead of expectations, good profits in the Investment Banking portfolio and a growing contribution of annuity revenue from the Asset Management division.

In April 2012, the South African Social Security Agency (SASSA) project commenced in conjunction with Net1. This is a significant undertaking for the Bank with 5,5 million cards having been issued to government grant recipients at 31 December 2012.

The Bank’s credit and liquidity position remains sound with nominal bad debts for the period and a healthy cash liquidity surplus. Bank deposits increased 60% to R4,7 billion (including R1,7 billion of SASSA funding) and advances increased 25% to R3,2 billion.

In March 2012, the Bank launched its first Exchange Traded Fund (ETF), Prefex, a preference share ETF which has grown to over R209 million. Total assets under management increased 77% to R11 billion, following the purchase of Plexus Asset Management. The performance of the core underlying portfolios and products was particularly pleasing.

In September 2012, the Bank increased its funding base by R500 million through the listing of a three year bond on the JSE at 180 basis points above JIBAR.


Fees from the increased card base will become meaningful in 2013, while low levels of corporate activity continue to place pressure on corporate finance fees. Financial Services will continue to focus on well secured loans with low risk of default and growth in assets under management.

Basis of preparation

The condensed consolidated financial information has been prepared and presented in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the listing requirements of the JSE Limited, the information as required by IAS 34: Interim Financial Reporting and the requirements of the South African Companies Act 71 of 2008. The report has been prepared using accounting policies that comply with IFRS which are consistent with those applied in the financial statements for the year ended 31 December 2012.

These condensed consolidated annual financial statements were approved by the board of directors on 26 February 2013.

Accounting policies

The accounting policies adopted and methods of computation used in the preparation of the condensed consolidated annual financial statements are in terms of IFRS and are consistent with those of the consolidated annual financial statements for the year ended 31 December 2011.

Audit opinion

The auditors, Deloitte & Touche have issued their opinion on the group’s financial statements for the year ended 31 December 2012.

The audit was conducted in accordance with International Standards on Auditing. They have issued an unmodified audit opinion. These condensed consolidated annual financial statements have been derived from the group financial statements and are consistent in all material respects with the group financial statements. A copy of their audit report is available for inspection at the company’s registered office.

Any reference to future financial performance included in this announcement, has not been reviewed or reported on by the company’s auditors.

The auditor’s report does not necessarily cover all of the information contained in this announcement/financial report. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor’s work, they should obtain a copy of that report together with the accompanying financial information from the registered office of the company.


Messrs JJ Durand and PJ Liddiard (as alternate) were appointed to the board with effect from 9 May 2012 due to the tragic loss of Mr MH Visser on 26 April 2012. Mr Visser’s contribution will be missed by the group.

Messrs AC Brahde and GG Gelink were appointed to the board with effect from 1 January 2013.

Mr WP Hartmann, responsible for the Trading division, was appointed to the executive committee on 1 June 2012 following the resignation of Mr AF Stewart from the board on 31 May 2012. The board of directors express appreciation for Mr Stewart’s contribution.

Ms B Ntuli was appointed to the executive committee in the position of Executive of Corporate Services on 1 December 2012.

Mr CAS Robertson resigned as Company Secretary on 1 February 2013 and was replaced by Mrs CI Lewis.

Post balance sheet events

There are no material post balance sheet events to report.


Grindrod is well positioned for growth, however drybulk shipping markets are likely to remain under pressure which will continue to impact the shipping earnings.

For and on behalf of the board

IAJ Clark AK Olivier
Chairman Chief Executive Officer