During the six months, Grindrod executed a number of transactions and made substantial progress on projects aimed at realising its strategy of becoming an integrated freight and logistics service provider, whilst retaining its position in shipping.

A notable transaction includes the introduction of Vitol as a partner in the coal, oil and tanker businesses. Good progress has been made towards completing the feasibility study to expand the Maputo coal terminal by 20 million tonnes.

The group’s terminal and marine fuel volumes were strong during the period despite the current environment. Shipping rates continued to fall during the six-month period. However, the division remained profitable before the required ship impairment.

The group generated earnings of R608,4 million (H1 2011: R277,4 million), representing a 119% increase.

Headline earnings per share increased by 25% to 69,4 cents per share (H1 2011: 55,7 cents per share). The non-trading items include the profit on sale of the Maputo coal terminal and the impairment of ship values.

An interim ordinary dividend of 17,5 cents per share (H1 2011: 17,5 cents per share) has been declared.

The group’s balance sheet remains sound with total assets of R20 billion. The net debt:equity ratio has reduced to 5% at 30 June 2012 on the back of the cash-on-hand at the commencement of the year and cash generated in the period. Net book asset value per share is R15,54.

Capital expenditure and commitments

Capital expenditure for the six months to 30 June 2012 amounted to R787 million, of which 70% 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 and coal marketing contracts.

Future capital is committed to the expansion of terminal capacity, rail infrastructure, locomotives and ships. The commitments exclude any planned expansions of terminal capacity in Maputo (20 million tonnes) and Richards Bay as well as development of a bulk liquid storage facility at Coega, each of which is subject to final board consideration.

Capital expenditure Capital commitments Split as follows:
      2013 2014 2015+ Total Approved

(R million)
Freight Services 269 864 157 27 1 048 176 872
  Logistics 110 105 130 27 262 42 220
  Ports, Terminals and Rail 159 759 27 786 134 652
Trading 90 48 1 1 4 54 5 49
Shipping 423 161 439 600 600
  Drybulk 256 73 103 176 176
  Tankers 167 88 336 424 424
Financial Services 53 53 53
Group 5
  787 1 126 597 28 4 1 755 181 1 574
Split as follows:                
Subsidiaries 322 913 234 28 4 1 179 63 1 116
Joint ventures 465 213 363 576 118 458

Cash flow and borrowings

Operating profit before working capital adjustments reflected R451,7 million (H1 2011: R422,1 million). The group’s working capital position reflects a net inflow for the period of R438,9 million largely due to the disposal of a 50% interest in Cockett Marine Oil. 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 reducing to R499 million as at 30 June 2012.

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

Shareholders’ equity

The total number of ordinary shares in issue is 599 515 314. The 9 179 348 ordinary shares repurchased in prior years, continue to be held in treasury. 2 150 000 of these 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

Revenue generated was R1,9 billion, a growth of 23% on the first half of 2011.

The division contributed earnings of R580,2 million, of which R414,9 million relates to the profit on disposal of 35% in the Maputo coal terminal. Trading profit of R171,7 million reflects a 31% growth on the prior period’s trading performance.

Ports and Terminals

Ports, Terminals and Rail earnings of R138,8 million from trading activities grew 40% despite product shortages at the Maputo coal terminal during the first half of 2012.

Following board approval to increase capacity by a further 1,3 million tonnes, Maputo coal terminal Phase 3,5 expansion project commenced during April 2012 and is scheduled for commissioning in 2013. This will increase the terminals’ 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 is progressing, with the feasibility due to be completed in the final quarter of 2012. The expansion project will involve excavation and land reclamation resulting in a footprint growth of 120 hectares, construction of two additional berths, a stockyard and railway infrastructure. To support the completion of the project, Grindrod introduced Vitol, one of the world’s largest energy trading businesses, as a 35% partner in the concession.

The rail resource utilisation on the Maputo corridor has improved and Grindrod continues to actively pursue further initiatives to increase the Maputo port utilisation. The Port of Maputo handled 6,9 million tonnes of cargo, 31% ahead of the prior period.

The Rail business conducted by RRL Grindrod continues to perform to expectations. The final locomotives of the initial 20 locomotive order for African Minerals Limited in Sierra Leone were commissioned and a lease for an additional 14 locomotives was concluded. The total rail fleet as at 30 June 2012 was comprised of 46 locomotives. A number of concession opportunities are being explored, which could positively impact performance over the next few years.

Port, Terminal and Rail operations are expected to continue to show improving performance due to increasing utilisation and improving operating efficiencies and are well positioned to benefit from increased demand for commodities.


Logistics earnings of R32,9 million were 3% ahead of prior period earnings from trading activities due to improved volumes in the clearing and forwarding and intermodal businesses. The prior period earnings included R22,8 million profit from the disposal of the perishable cargo business.

The road transport operations were impacted by lower commodity volumes, the commissioning of the Transnet pipeline between Durban and Gauteng during the first quarter of 2012 and a reduction in automotive volumes. The business benefited from improving operating efficiencies during the latter part of the first half of 2012.

During June 2012, Logistics finalised the transaction to purchase the shares not already owned, of the Botswana based fuel logistics company, Petrologistics Botswana (Proprietary) Limited.

Röhlig-Grindrod merged with Calulo’s clearing and forwarding business.

Performance of the Logistics business segment is expected to strengthen during the second half of 2012 as volumes improve and greater benefits are extracted from the successful optimisation of the operations. The South African petrochemical sector is expected to experience some instability during the second half of the year as the impact of the new pipeline is fully absorbed by the sector.


The Trading division generated revenue of R15,5 billion, a growth of 9% on the first half of 2011. Volumes decreased from 3,9 million tonnes (H1 2011) to 3,3 million tonnes (H1 2012) and operating margin per tonne improved from US$3,80/tonne (H1 2011) to US$4,95/tonne (H1 2012).

Earnings were R96,2 million, growing 32% on the first half of 2011 (H1 2011: R72,7 million).

Marine fuels performed exceptionally well, achieving a 130% increase in earnings, through improved volumes and margins. The business continues to grow its global presence with new offices opening in Copenhagen and Dubai. The Vitol joint venture provides the business with additional opportunities for growth and a number of initiatives are already underway.

The agricultural commodity business had a challenging first half. However, a crop financing programme should contribute towards an improved result in the second half. Investment in storage and processing operations is in progress.

The industrial raw materials business had a mixed first half with coal and steel performing well and chrome and stainless steel performing below expectation. The coal trading joint venture with Vitol, a combination of the respective sub-Saharan coal trading businesses, had a good half-year.

The shortage of agricultural commodity has resulted in prices rising and pressure on working capital. An improved performance from the agricultural commodity business is expected in the second half.

Physical demand for industrial raw material commodities continues to increase despite the slowdown in China’s growth.

The joint venture with Vitol will achieve further growth in volume in marine fuels.


The Shipping division earnings, at R9,4 million before impairments, were lower than the first half of 2011 due to reduced rates across all sectors.

Whilst commodity demand increased, there continues to be an oversupply of ships. The drybulk business remains profitable whilst the tanker revenue was below cost. Ship operating results increased with both the Handymax and Parcel Service operations improving profitability. The South African based tanker operating joint venture with Calulo Shipping performed well, as did the local bunker tanker business.

Due to further weakness in ship charter rates, ship impairments were deemed necessary. Some 50% (weighted by revenue) of the ships are contracted out for the second half of 2012 and about 19% (weighted by revenue) for 2013. The value of profit contracted is US$9,6 million for the second half of 2012 and US$16,9 million for 2013.

Rates in all sectors are expected to remain under pressure in the near term as tonnage continues to deliver into an oversupplied market.

The lack of global bank financing is positively curtailing newbuilding supply.

Financial Services

The Financial Services division earnings of R21,7 million are up 3% on H1 2011. The first half performance was driven by good earnings from the Banking division, with both net interest margin and fee income ahead of expectations and a growing contribution of annuity revenue from the Asset Management division.

The Bank’s credit and liquidity positions remain strong with no bad debts for the period and a healthy cash liquidity surplus. In the first half of the year deposits increased 34% to R3,9 billion and advances increased 16% to R2,4 billion.

In March the Bank launched its first Exchange Traded Fund (ETF), Prefex, a preference share ETF which has grown to over R200 million. Total assets under management increased 72% in the first half of the year to R10,5 billion, following the purchase of Plexus Asset Management. The performance of the core underlying portfolios and products was particularly pleasing.

The project to rollout the South African Social Security Agency (SASSA) bank cards to all government pension and social grant recipients commenced in April 2012, with 2,5 million account holders issued with bank cards.

Financial Services is currently positioned for a strong second half performance as it is relatively well insulated from the continuing problems in global financial markets. Increasing regulatory requirements, particularly with respect to liquidity, will increase the cost pressures in the sector and inevitably reduce overall net interest margins. The growing level of annuity based income will, however, counter these costs to some extent and also reduce the historic volatility in earnings from this division. The SASSA beneficiaries project should result in over nine million new accounts with a resultant growth in fees to be realised from 2013.

Basis 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, No 71 of 2008 and the JSE Listings Requirements. These accounting policies are consistent with those applied in the previous half-year, except for the adoption of IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IAS 27 (as revised in 2011) Separate Financial Statements, IAS 28 (as revised in 2011) Investments in Associates and IFRS 12 Disclosure of Interests in Other Entities. These statements have been retrospectively applied.

The accounting for the acquisitions and disposals made by the group has been provisionally determined as at 30 June 2012. The group disposed of net assets of R613,8 million during the period. At the date of finalisation of these results, the necessary market values and other calculations had not been finalised and they have therefore been provisionally determined based on the directors’ best estimates of the likely values.

These unaudited interim results have been prepared under the supervision of AG Waller, CA(SA).


Mr MH Visser passed away tragically on 26 April 2012. His contribution will be missed. Messrs JJ Durand and PJ Liddiard (as alternate) were appointed to the board with effect from 9 May 2012.

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


The group anticipates an increase in full year earnings in 2012.

Statements contained throughout this announcement regarding the prospects of the group have not been reviewed or reported on by the group’s external auditors.

For and on behalf of the board

I A J Clark A K Olivier
Chairman Chief Executive Officer