Grindrod shipping to list in Singapore
Company to spin off unprofitable business, but headline earnings for freight and financial services shoot up
Grindrod appears to have turned a corner in the year to end-December 2017 after years of listless international shipping markets. Announcing its annual results on Friday, it said it had entered into agreements to dispose of its shipping business to an independent, newly incorporated Singapore registered company, Grindrod Shipping Holdings, from mid-June 2018.
Grindrod appears to have turned a corner in the year ended December 2017 after years of listless international shipping markets. Announcing its annual results on Friday, the JSE-listed logistics, freight and financial services group also says it has entered into agreements to dispose of its shipping business to an independent, newly incorporated Singapore-registered company, Grindrod Shipping Holdings, from mid-June 2018.
Headline earnings per share for continuing freight and financial services operations rocketed 173% in the year to 76c a share from 27.8c previously.
But a headline loss of R203m from the shipping business in 2017 — albeit much better than a headline loss of R570m for these operations in 2016 — shows seas are still choppy.
This meant an overall group headline loss per share of 47.4c in financial 2017 from a headline loss per share of 61.2c in 2016. During the past few years prolonged low minerals commodity demand and excess global shipping capacity have forced major restructuring in the company. However, as markets have picked up, continuing businesses — comprising Maputo port, terminals, logistics, marine fuels and agricultural logistics and financial services — posted headline earnings of R571m in 2017, a marked improvement on R209m in 2016.
“The change in the business cycle has impacted positively on the business and has provided the stimulus to implement the spin-off of the shipping business with a planned listing on the Nasdaq with an inward listing on the JSE,” Mike Hankinson, executive chairman of Grindrod, said on Friday.
The net asset value of the shipping business was reported at about $320m fair value.
Shipping markets started to turn in the second half of 2016, with improved dry-bulk rates and terminal utilisation boosting earnings for financial 2017. To this end, group revenue from continuing operations, inclusive of joint ventures, was up 14% to R21.2bn in the year.
Grindrod group financial director Andrew Waller said on Friday that shipping operations were heavily dependent on South African minerals.
SA’s better economic performance in the past five months amid the upturn in global minerals commodities markets had helped boost the results.
He said Grindrod had taken substantial costs out of its logistics operations.
Meanwhile, the shipping business had been valued at “very low” multiples at a time when business was increasing.
“I think the listing is absolutely at the right time,” Waller said, after the shipping business had ridden out the last four years or so “trying to stay afloat”.
Along with the sale and closure of rail businesses held for sale, some logistics operations and ancillary services might still be sold, said Ron Klipin, a Cratos Capital portfolio manager. Possible buyers could be Bidvest, Imperial or Super Group.