Grindrod is targeting a June listing for its Shipping division.
A positive change in the business cycle “had provided the stimulus to implement the spin-off of the Shipping business with a planned listing amongst its peer group on the Nasdaq, with an inward listing on the JSE”, said executive chairperson Mike Hankinson on Monday, as he announced the group’s results for the year ended December 31 in Johannesburg.
He noted that dry-bulk shipping rates have improved significantly since 2016.
Supermax rates, for example, were at $72 729 a day in October 2007, dropping to $3 693 a day in 2016. Rates recorded in the first quarter of this year reached $10 592 a day, which was “a profitable level”, said Hankinson.
He believed rates would improve further into the future.
Hankinson said the new shipping firm would be based in Singapore.
Grindrod Shipping CEO Martyn Wade added that the new company would consider an equity raising after listing in order to increase the fleet “at the appropriate time”.
The net asset value of the shipping business is $320-million.
Grindrod FD Andrew Waller said the group opted for a Nasdaq listing, as the executive did not consider selling the business at $320-million “a good idea”.
Apart from a separate listing for its Shipping division, the group’s restructuring efforts include closing the rail assembly business and selling its rail construction business.
These business are now all listed as discontinued operations.
The businesses that remain comprise Maputo port and terminals, logistics, marine fuels and agricultural logistics (all bundled under Freight Services) and Financial Services.
Hankinson said it was Grindrod’s intention to “bulk up” the Freight Services division over time.
Freight Services division CEO Bongiwe Ntuli noted that the business in 2017 benefitted from an improvement in the commodity markets, after “a few difficult years”.
Capacity utilisation at the Matola coal and magnetite terminal, for example, had improved from roughly 57% in 2016, to 71% in 2017, with more than 80% utilisation expected this year.
The division should also benefit from a decision by the Zambian government that 30% of all copper should be moved by rail.
The business during 2017 also started work to execute a long-term pit-to-port logistics contract for Syrah Resources, in Mozambique.
This contract positions Grindrod as a key player in the Nacala region, in Mozambique, a growing port hub 500 km from Balama.
Grindrod revenue from continuing operations, including joint ventures, increased 14%, to R21.3-billion for the year ended December 31, compared with the previous year. Headline earnings increased by 173%, to R570.8-million.
Shipping recorded a headline loss of R202.6-million, compared with a loss of R560.6-million in the previous year.
The performance from all Grindrod operations culminated in a loss per share of 77.6c, compared with 254.2c in the previous year.
Looking ahead, Hankinson said Grindrod was confident that the restructured group was “well positioned to benefit from increasing shipping rates, stronger demand for commodities and a more positive outlook for South Africa”.