DURBAN-based logistics solutions company, Grindrod Limited, is reaping the rewards of taking measured risks by investing in infrastructure and capacity in Africa. Providing integrated logistics solutions for existing customers in SADC countries and Sierra Leone, the company is optimistic about further growth, particularly in East Africa. It is establishing seamless cross-border rail routes for regional trade and exports.
Presenting the company’s interim financial results for the six months ended June 30, 2023, Grindrod CEO, Xolani Mbambo, shared an upbeat vision of the possibilities created by cooperation and investment in an efficient, well-priced, reliable pit-to-port service for mining customers.
Grindrod had teamed up with European partner, Hamburger Hafen Und Logistik Aktiengesellschaft, to bid for Transnet’s Durban Container Terminal Pier 2 contract, but the perceived risk was above the partner’s threshold. The company is proving its ability to operate a port on concession, as it invests in Mozambique.
Mbambo said if opportunities come up that tick all the right strategic boxes, Grindrod will put its hand up to be given the opportunity to work with partners.
The company has accumulated a fleet of sixty locomotives, some of which are undergoing refurbishment. He said refurbishing locos cost around US$1,5 million and were on track in about a year which gives the company more flexibility than buying new locos for US$3,5 million and waiting two to three years.
Locally, he expressed disappointment that the company’s conveyors at the Richards Bay Coal Terminal, damaged in the fourth quarter of 2021, were not yet fully operational and hoped that their repair would be completed by the end of this year.
The results
Grindrod reported core headline earnings of R563 million for the first six months of this year (period), a growth of 26% on prior period, and doubled its dividend to 34.4 cents a share. This was supported by continued strong demand for Grindrod’s logistics solutions through its cargo terminals, infrastructure footprint, and complementary logistics service offerings.
Port and terminals
Maputo port reported an increase of 30% on prior period volumes. Two mobile harbour cranes at a cost of ZAR 392 million (at 100% shareholding) were delivered and commissioned during the period, adding to the port’s berth handling capacity in anticipation of the expected increase in demand for the export allocation.
Overall, Grindrod’s dry bulk terminals in Mozambique performed well. Volumes were up 17% on the prior period as the demand for the export terminal footprint persisted. The first phase of the Matola dry bulk export terminal upgrade is progressing well with debt raising to fund the project underway and a bankable feasibility study well advanced. Detailed design work on major plant components has also commenced.
Logistics
The eSwatini multimodal corridor operation, which provides customers in the Mpumalanga area with an alternative route to Maputo and Matola export terminals, performed well. Three hundred and fifty-seven trains moved through the corridor during the first half of the year, 90% up from the prior period.
The northern Mozambique operations delivered good results with headline earnings up 15% on the prior period. Grindrod has invested R207 million into the Northern Mozambique and East Africa business in line with the company’s growth ambitions in these geographic areas. The construction of the Pemba port warehouse has been completed and will enable a new route-to-market for a graphite customer. A landing craft vessel was purchased to facilitate a regular marine freight service between the various commercial ports on the East Africa seaboard and specifically aimed at servicing project cargo logistics. Project cargo handling equipment for the crude oil pipeline logistics solution in Uganda has also been deployed.
Capital expenditure in the container landside businesses amounted to R106 million. This includes handling equipment as well as further expansion at the container facility in Johannesburg to meet growing market demand and offer customers a full suite of container handling services. Integration of Grindrod’s and Maersk’s South African container businesses, following the merger transaction implemented at the start of the year, is progressing well and the operations are ramping up in line with expectations.
Grindrod’s ships agency and clearing and forwarding headline earnings were strong, up 149% on the prior period due to new customer contracts and an increased number of port calls.
Grindrod is collaborating with Transnet Freight Rail, Mozambique Port and Railways (CFM), Zambia Railways, eSwatini Rail and National Railway of Zimbabwe on the ongoing initiatives to move cargo on trains running seamlessly between the various jurisdictions. Grindrod’s rail leasing business in Sierra Leone continues to deliver, having exceeded the 10 million tonne-mark since its inception in February 2021. The rail leasing business was recently awarded a contract for operating a manganese rail siding in the Northern Cape. Grindrod is focusing on a systematic increase of its rolling stock capacity over the coming years in response to the anticipated demand increase and to reduce logistics costs for customers.
Conclusion
Grindrod’s purpose is to make a positive difference in Africa’s trade with the world, touching the lives of the communities in which it operates. This drives the company’s strategy to provide efficient and cost-effective logistics solutions to customers. “We have ambitious plans to promote trade in sub-Saharan Africa and are eager to strengthen our relationships and collaborate with key stakeholders to benefit the continent. Rail will play a pivotal role in achieving these plans,” said Mbambo.