FREIGHT AND FINANCIAL SERVICES
Global trade boom gallops to Grindrod’s rescue
Freight and financial services group Grindrod, which returned to profitability in the first half of 2018 after it separately listed its loss-making shipping business, is expecting to benefit from an improvement in the global economy and growth in commodity shipments.
Grindrod, which reported an interim profit of R2.4bn for the six months to end June, compared with a restated loss of R48.8m in the 2017 period, expects its freight services business to benefit from improved volumes in chrome, ferrochrome and coal shipments, it said. While economic growth in SA remains "poor", the group is benefiting from a strong world economy, with global output estimated to grow by 3.2% in 2018, which bodes well for the commodity market.
"Commodity demand is at more sustainable levels and world seaborne trade continues to grow," the group said on Friday. Grindrod, which has operations in 30 countries, focuses on two key divisions following the spin-off of its shipping division: freight and financial services.
Its assets include the North-South rail corridor from Beitbridge to Victoria Falls, linking mining operations in Zambia and the Democratic Republic of Congo to SA, and port terminals in Richards Bay in KwaZulu-Natal, Walvis Bay in Namibia and Maputo in Mozambique.
It is hoping to find a buyer for its rail assets in Sierra Leone, where an iron ore mine it serviced was shut. The value of these assets was written down by R637.5m in the first half.
Grindrod Shipping, which is listed separately on Nasdaq and the JSE, reported last week that its revenue declined 22% to $151m for the six months to end-June from $194m in the first half of its 2017 financial year. Its interim loss nearly doubled to $13.5m from $7m.
The group said it is expecting "conservative growth" in its financial services arm, the second-biggest profit contributor, due to a "challenging environment" in SA. The division accounted for nearly 30% of attributable profit in the interim period, and was affected by the cancellation of Cash Paymaster Services’s (CPS) contract to pay social grants. Grindrod Bank distributed social grants on behalf of CPS.
Grindrod Bank has been shortlisted as one of four potential buyers for Mercantile Bank, a small Portuguese-owned commercial bank that is operating in SA.