Grindrod’s locomotive unit on track for African growth

220812 Atlas trading and shipping.Grindrod released their annual results today.photo Supplied

220812 Atlas trading and shipping.Grindrod released their annual results today.photo Supplied

Published Feb 28, 2013

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Roy Cokayne

Grindrod expects big things from its newly established locomotive business.

The listed integrated logistics service supplier invested R574 million into this business in its 2012 financial year and has committed a further R16m for the year to December.

Alan Olivier, Grindrod’s chief executive, said yesterday that this business positioned the group to take advantage of opportunities in rail.

There had been significant investments in its manufacturing capability and it now owned 65 locomotives, with 30 locomotives on order and a good pipeline of inquiries.

Olivier said it was commissioning the final locomotives of the 20 ordered for African Minerals in Sierra Leone and concluded a lease contract for another 14 locomotives to the iron ore producer.

He said the locomotives it was building cost about $2.2m (R19.4m) each compared with the $3m plus for locomotives manufactured by its opposition, General Electric or Electro-Motive Diesel (EMD).

EMD established a joint venture with listed distribution group Barloworld last year.

Olivier said Grindrod had an extremely competitive offering for the African market on diesel electric locomotives but was not tendering for the renewal of Transnet’s rolling stock.

“We can’t base our rail business around Transnet. They do their own thing. If they want to, they build their own equipment, their own wagons and have a different agenda. Our strategy is not based on Transnet at all other than getting them to support the Maputo port,” he said.

Grindrod has a more than R10 billion capital expenditure projects pipeline over the next five years, which aims to transform the group into a fully integrated freight and logistics service provider through substantial investment in its strategically positioned ports and terminals capacity, particularly at the Maputo port.

Olivier said Grindrod had also invested in signalling and control systems. Grindrod had also made an investment in a 46.4 percent stake in the New Limpopo Bridge Project concession, which was the Zambian and Zimbabwean rail concession of the north-south line.

Olivier expected the group would be investing a similar amount of its balance sheet in infrastructure as it did in shipping once it had completed all the infrastructure projects it had embarked on.

Driven by earnings growth in the freight services and financial services divisions, Grindrod reported yesterday that headline earnings a share increased 22 percent to R1.219 in the year to last December from the year before.

The shipping division made a R169.7m loss, including impairments of vessels of R173.3m.

Revenue fell by 24 percent to R27.26bn, while attributable income increased by 61 percent to R853.3m.

A dividend of 32.9c a share was declared, 11.5 percent higher than the previous year.

Olivier said Grindrod was well positioned for growth but dry-bulk shipping markets were likely to remain under pressure, which would continue to have an impact on shipping earnings.

The shares rose 1.53 percent to close at R17.26 yesterday.

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