Grindrod’s share price increased by 6.3 percent to R9.40 yesterday morning, after it flagged a strong performance in the first five months of 2022.
The group said in a pre-close update yesterday it expects headline earnings per share to improve by at least 100 percent in the year to June, 30 compared with 0.7 cents for the previous corresponding period.
Earnings and operational performance in port and terminals, and logistics businesses had been pleasing, underpinned by “significant volume growth”, the group said.
The bank, which is being sold to African Bank for R1.5 billion, also recorded healthy earnings’ growth.
Proceeds of R150 million from non-core asset disposals were applied to settle private equity debt.
@smalltalkdaily analyst, Anthony Clark, said in a recent research report: “In an uncertain market environment, especially going into the traditionally quieter Northern hemisphere summer and South African winter, Grindrod given its firmly established value unlock credentials, expectation of further asset sales as well as the sparkle of (possible private participation in the state port and rail sector), should be a far better asset class to hold given its valuation and resilience compared to the general market.”
Grindrod said yesterday port volumes grew 26 percent compared to the prior period. In May, the Maputo Port inaugurated 1 058m of berthing area. These berths, expanded and dredged to depths of up to -16m, were now operational, allowing the port to receive more and bigger vessels.
Volumes from Grindrod’s dry-bulk terminals grew by 47 percent compared to the prior period.
“This is remarkable growth given disruptive weather challenges and a 20-day suspension of the vessel loading activity at Matola in April, due to the damage on the terminal’s berth infrastructure,” Grindrod’s management said.
The Maputo car terminal volumes grew 51 percent. The terminal benefited from increased car-transshipment volumes and project cargo storage.
The coastal shipping and container depot business performance was significantly up after recovering from flooding at five depots in KwaZulu-Natal.
“Interim insurance proceeds have offset the asset impairments required as a result of the flood damage.”
Grindrod Rail deployed three more locomotives to its Tonkolili iron ore mine customer in Sierra Leone, increasing its fleet there to 11.
The Northern Mozambique graphite operations and the clearing and forwarding business delivered solid results.
Grindrod Bank’s advances remained stable while its deposits grew 7 percent to R12 billion. The bank remained cautious in its lending activities, and retained surplus liquidity of R5bn at the end of May.
Management was working with the Marine Fuels management and co-shareholder to exit this investment. The owners of the KwaZulu-Natal North coast properties were also being engaged to realise the group’s significant exposures.
In early April, the fuel carrier fleet in Botswana was disposed of at carrying value which concluded the exit from the road transport businesses, in line with group strategy.
“The demand for physical goods that began during the pandemic highlighted infrastructure shortcomings that could take years to fix. And although shipping lines face steeper fuel, vessel and insurance costs, rate increases have swelled the revenues and profits made by the industry’s giants.
This is where a company like Grindrod can come into its own. The cleaning up of its disparate portfolio to focus on logistics and ports highlights its natural business attractions as an efficient and dependable operator,” Clark remarked in the research note.