GNDE - Grindrod is tipped to boost earnings 150%

08/06/2004 10:31:51

Grindrod is tipped to boost earnings 150%
June 8, 2004

By Samantha Enslin

Durban - Shipping and logistics group Grindrod's first half, which draws to a close this month, appears to be one of its finest periods and market talk suggests that the company could post earnings growth of 150 percent.

Grindrod has already advised shareholders that earnings for the six months to June were expected to be substantially higher than the previous period, in which headline earnings a share rose 24 percent.

According to JSE Securities Exchange regulations 'substantially higher' refers to an increase of more than 30 percent.

An analyst said yesterday a rise of 150 percent was feasible after subsidiary Island View Shipping (IVS) locked in high shipping rates through fixed charters.

International shipping market rates for some vessels have dropped in the past two months as China has temporarily stopped ordering iron ore and is drawing on stockpiles.

Last year rates for cape-size vessels were as high as $104 000 a day (R673 317). These prices were driven by a surge in raw material demand in China, which resulted in a world shortage of vessels.

Analysts see the current fall in Chinese demand for raw materials as temporary and expect strong demand from China to continue until 2008.

In the past two months rates for cape-size vessels have fallen to about $45 000 a day.

Nevertheless they are still significantly higher than the $29 000 a day seen early last year and IVS is poised to achieve good margins.

The company chartered in vessels when shipping rates were in the doldrums and chartered them out at significantly higher prices as shipping rates climbed.

This is evident in the full-year results to December 2003 in which the company reported a 35 percent rise in attributable income to R240 million.

The company has already locked in previous high rates through fixed-rate contracts ranging between one year and 10 years.

Despite the upbeat outlook the share price, from a high of R22, closed at R19.40 yesterday, for a gain of 20c, while the transport sector gained 0.26 percent.

An analyst said the share price could have come under pressure because of the fall in shipping rates but more likely investors who bought at R7 in the second half of last year were taking profits.

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