Dubai scam forces big Grindrod write-off
Freight and financial services group incurs a significant impairment in the six months to the end of June
A SCAM involving oil trading at the Dubai operations of freight and financial services group Grindrod caused the group to write off a significant impairment in the six months to June 30, chief executive Andrew Waller said.
Interviewed after the release of the group’s half-year results on Friday, Waller said the Dubai authorities and the group’s insurers had requested he not divulge the details of what transpired at the onshore bunker oil and inshore oil trading operations in Dubai. “Several employees have been dismissed and legal proceedings instituted. The business has notified the insurers of a potential claim,” he said. The matter involved several employees, as well as individuals outside the group, he said.
Meanwhile, Grindrod management had decided that the Marine Fuel operations, along with agricultural investments, were non-core, and a decision had been made to sell these.
Discontinued operations – Marine Fuel and agricultural investments – reported a trading loss of R241 million (R3.67 billion) versus a R371m trading profit in the same period last year. This included the impairment provision in the Marine Fuels United Arab Emirates business.
Waller said Grindrod’s focus on the trade corridors in sub-Saharan Africa had resulted in the continuing operations turning in a profit in the six months to June 30, compared with a loss previously. Continuing operations generated earnings of R136.7m against a loss of R418.2m in the first six months of 2018. Headline earnings for these operations grew 118 percent to R136.7m. The headline loss per share for total operations was 17.8 cents versus a 46.3c profit previously.
“In most businesses, we saw improvement in results. Strong iron ore prices in the first half sustained chrome volumes and our Nacala operational ramp-up also contributed to the improvements,” he said. An emphasis on sitting down with potential clients, such as commodity producers in Zimbabwe that were struggling with cash issues, and helping to provide them with solutions, was growing the business in a tough environment, he said.
The share price traded 2.9 percent higher at 496c by midday on the JSE on Friday, when the FTSE/JSE All Share Index was down 0.5 percent. The share closed at R4.99.
Looking to the second half, the focus would remain on the regional trade corridors, while a recapitalised Grindrod Bank would focus on its core lending book and the development of its small and medium-sized enterprises and retail offering, Waller said.
The bank was further capitalised with R100m, following good growth in deposits and advances. The bank is focused on property lending and the small and medium-sized enterprises market.
Continuing operations – Port and Terminals, Logistics and Bank – generated first-half trading profit of R678m, up 22 percent on the prior year.
Scaling up the port, terminals and logistics businesses, by investing in infrastructure and assets, included acquiring mobile cranes, as well as slab and quay development in Maputo port to add capacity and improve service.
Facilities in Richards Bay and Durban were upgraded, while 24 locomotives were extracted from the Tonkolili mine – the mine closed in 2017 – in Sierra Leone for deployment in sub-Saharan Africa on leasing contracts.
The construction and development of the Ngqura Liquid Bulk Terminal commenced.