GNDE - Diversification keeps Grindrod happily afloat

27/05/2003 11:18:57

Buoyant shipping market has lifted rates
KwaZulu-Natal Correspondent

DURBAN Grindrod's diversification into land-based operations and a shippooling initiative with international shipowner and operator Lauritzen Bulkers will offset the negative effect of the strengthening rand, says MD Ivan Clark.

His comments, made yesterday, come as the appreciating currency puts a host of local companies under pressure.

However, a more buoyant international shipping market has lifted rates, particularly among the large Cape-size vessels, and Grindrod is benefiting from these favourable conditions.

The group was one of a number of international shipping companies that were hammered several years ago when international markets crashed.

Grindrod has since diversified into land-based operations.

Clark said the decision to diversify investments and thus cushion the effect of shipping cycles, was paying dividends.

The group now has a wider spread of shipping interests internationally and has entered a range of joint ventures with land-based shipping operations.

The Cape-size vessel market had also strengthened on the booming demand for steel in China and the steel restocking in Japan and Europe.

These vessels were now commanding daily rates of $25000, against $12000 a few months ago.

Clark said that the Lauritzen joint venture had ensured Grindrod had a wide spread of ships across international shipping routes.

Although the group "had to work harder to earn the same amount of randdenominated earnings", this initiative, together with the diversified land-based operations, was offsetting the strength in the currency.

In the annual report, chairman Murray Grindrod said that the strength in world bulk shipping markets and the growth in existing businesses would boost Grindrod to positive growth in the current financial year.

He said the freight management division grew substantially, with a broader product mix and improved market share.

The division was now "a substantial contributor" to profitability and would continue seeking further growth in the freight logistics field this year.

Grindrod had also completed the expansion of the Richards Bay-based Kusasa Bulk Terminals project, which would service the export of heavy mineral products. A rail tippler and support facility were under construction next to the Kusasa site.

The group would consolidate its market position this financial year, Clark said earlier this year, as it bedded down capital spending of R700m on three product carriers.

Grindrod achieved its third consecutive year of growth in the year to December, despite strained local conditions and international shipping markets that were depressed for most of the trading period.

The group committed R140m on capital spending last year, followed by two more tranches of R480m and R120m, and Clark said Grindrod had reached its balance sheet and funding limits. He has dismissed the possibility of further injections of capital into Grindrod.

Grindrod holds its annual general meeting tomorrow.

May 27 2003 07:05:35:000AM Nicola Jenvey Business Day 1st Edition

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