[TOP STORY] Grindrod delivers pleasing results despite constraints

SIMON BROWN: I’m chatting with Xolani Mbambo. He is CEO of Grindrod Freight Services, but will be Grindrod group CEO from January 1 – now CEO designate, I suppose. Results for the six months ending June. From core operations revenue up 31%, headline earnings up 53%, and a dividend of 17.2%.

Xolani, I appreciate the time today. First question. Global supply chains, of which obviously Grindrod is an integral part – are they improving or are things starting to get back to normal?

XOLANI MBAMBO: In a time we think they’re getting back to normal, certain events come through. But what we are seeing is that they still remain relatively constrained. The container shortage is still impacting global supply chains. So yes, I think we’re still seeing some constraints. One hopes that at some stage the logistics supply chain globally will unwind and normalise.

SIMON BROWN: I take your point around other things happening. You had the floods, there was the fire at Richards Bay. There have just been the other curve balls – although listening to the presentation around the results and looking at the numbers themselves, neither of those were major setbacks for the group.

XOLANI MBAMBO: Absolutely. If you localise the issues in terms of moving away from the global supply constraints, and you localise it back into our business, of course we had massive challenges. You know very well about the fire in Richards Bay, which means at this stage we don’t have a convertible … link for our facility. We had massive floods in Duran, which impacted our Durban container … facilities. We managed to get back within two weeks, which was really, really good of the team. And in Matola we had 20 days of not loading the vessel because of an incident that we had on the quayside. With all of these, the teams have [worked] very hard to make sure that we return to normalcy and the volumes that we’ve achieved are on the backdrop of those challenges. So I’m quite pleased with what the teams have achieved.

And of course the markets are in our favour, so we’ve got some tailwinds and I say, well the plane … on the benefits from tailwinds, if it’s up in the air, right?

SIMON BROWN: [Chuckling] Fair point. And strong port terminals. It’s strong across the board – ports and terminals. How much is base effect, because of course the comparable period still had some lockdown versus sort of increasing capacity, and perhaps you are just seeing increasing demand from your customers?

XOLANI MBAMBO: Absolutely. But if you look back, I’m quite encouraged because we started seeing this trend of this volume uptick from the second half of last year. If you recall in 2020, when we had a lockdown, yes, we saw the massive depression in volume performance. But last year in the second half of the year we started seeing an uptick after we implemented massive operational excellence strategies and upgrading our equipment. And with the markets coming through, we were then able to take advantage of that. So we saw an uptick in volume in the second half of the year, and we are seeing an uptick in the first half this year, which is a continuation from that.

So I’m quite pleased with what we’ve accomplished so far.

SIMON BROWN: Your vehicle volumes? Are we seeing that pickup? We’ve had issues with supply chains because of chip shortages. When I speak to the likes of Combined Motor Holdings, they just can’t get enough to sell. Is that coming back to normal, or are there still some challenges in that space?

XOLANI MBAMBO: As you know, we’ve actually exited the vehicle-transportation business, which was a road-transportation business. What remains at the moment is our car terminal in Maputo. That terminal – what we seeing is it’s benefiting a lot from the increased demand of the second-hand cars into the terminal. And secondly, we are also seeing an increase in the trans-shipment of those second-hand cars going out into Africa.

Thirdly, if you recall, last year we had the LNG project, where we ended up handling the project cargo, and we use this facility car terminal to actually handle some of that project cargo, and we’re seeing that sort of continuing going forward. We benefited definitely in the first of this year on the project cargo. So that’s what has driven the 30% growth in our car terminal, which is very pleasing.

SIMON BROWN: You showed an image during the presentation with you and your colleagues around the various different commodities, and sort of your take on it. In particular coal – it had the red dot next to it. Not bullish long term. Is my understanding correct on that? Is that not bullish in terms of perhaps the pricing, but the demand is there? You are increasing capacity at Maputo.

XOLANI MBAMBO: A good question, Simon. What happened is when we got the boom we’ve always had our coal terminal facility at 1.2 million tonnes capacity. But if you look at the numbers, we’ve always said that that capacity is scalable, which means that we can respond if market conditions improve. And we certainly saw that and we responded accordingly. We invested over $6 million in that facility. The payback has already been achieved; it was half a year’s payback, and we are now sitting at 4.5 million tonnes of capacity. We are recently hitting a run rate of 300 000 tonnes a month.

Now, coming to your question, why are we having a red dot? It’s about the real fundamentals of coal. As you know, this story is around green[ing], etc. We feel that, based on that, as soon as there is a breakthrough in renewables as a base load for power supply, coal and … fossil fuels for that matter will be under pressure. So it’s on that basis that we are putting a view.

Of course there’s a different view out in the market that says what they call a just transition from fossils to non-fossils will take longer. So we are observing and, of course, if we are wrong, that wouldn’t be wrong for us because then it means we’ll have longer participation in this commodity.

SIMON BROWN: I take your point on that. A quick last question. Grindrod Bank being sold to African Bank – any update or any idea around timelines?

XOLANI MBAMBO: The transaction is progressing very well. We are pleased with where we are. We’ve received a few questions, nothing insurmountable, from the authorities in terms of that. If you ask anyone, we pray and hope that by the end of the year the transaction [will be] concluded. Possibly it can go [further], but I’m very positive with the progress that I’m seeing to date.

SIMON BROWN: Okay. That’s fairly quick timelines. We’ll leave it there. Xolani Mbambo, CEO designate of Grindrod, I really appreciate the time today.

XOLANI MBAMBO: Thank you.

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