Stormy markets pound Grindrod

Grindrod continued to sail in choppy waters as volatile commodity markets pummelled the freight and shipping group’s earnings. It was a tale of two halves in the year to December, with business improving in the second half.

Grindrod continued to sail in choppy waters as volatile commodity markets pummelled the freight and shipping group’s earnings. It was a tale of two halves in the year to December, with business improving in the second half on better demand and prices for thermal coal, iron ore and copper.

But there was no dividend in the year after an attributable loss of R1.9bn.

“The real ramp-up in commodity prices has [only] been in the last few months,” CEO Alan Olivier said on Thursday. This meant income would only look better in the future.

The headline loss of R460m compared with headline earnings of R559m in 2015. This was worsened by net foreignexchange losses of R138m, arising primarily from its Mozambique operations and UK investments. The headline loss per share of 61.2c in 2016 compared with headline earnings per share of 74.4c in 2015.

On top of a R675m impairment in the rail business — accounted for as a business held for sale — Grindrod had raised a further impairment of R644m. The net carrying value of R326m was the best estimate of proceeds to be received.

Cratos Capital portfolio manager Ron Klipin said potential green shoots could steer Grindrod into calmer waters.

A significant change in commodities demand had improved dry-bulk shipping rates and Grindrod profits are expected to gain momentum in 2017.

Infrastructure spend in the US should also be positive.

With the company’s strong balance sheet, gearing being at 2% and heavy capex commitment at a peak, rising minerals volumes were going through Richards Bay and the expanded Maputo port.

“Grain terminals should also show a recovery,” Klipin said.

Currency volatility would be challenging, on top of soft tanker rates and possible further rail impairments, he said.