SA logistics group Grindrod is optimistic about the opportunities that SA’s logistics network reform agenda will provide this year, and has begun the bidding process for third party access to Transnet’s vast rail network across SA.
Open access to the rail network by third-party operators, a flagship logistics reform agenda, has the potential to turn around the logistics sector by lifting the burden on SA’s road network and improve efficiencies on the rail network.
If done correctly, the country’s rail network could become the cornerstone of economic growth and job creation, said the Road Freight Association, but it first requires a large amount of investment to fix the damage done by theft, vandalism and outdated systems over the years.
The publishing of the Transnet Network Statement, approved by transport minister Barbara Creecy in December, was a big step in facilitating third party rail access, but Transnet warned that it would need about R14bn a year of investment in its six corridors.
Against this backdrop, Grindrod is approaching the bidding process for third party access with caution.
The group emphasised that it will be selective in the corridors it tenders for, evaluating them based on efficiencies, customer commitments and their understanding of the corridor, as well as its affect on overall returns across the logistics value chain.
“Grindrod is uniquely poised to take advantage of the opportunities in the logistics space as SA progresses on its logistics network reform agenda.
“Grindrod’s capital allocation framework, growth opportunities, track record of operational performance and healthy balance sheet will enable investment in future growth and drive strong returns for shareholders,” said the company.
The group has its eyes on several logistics infrastructure-led investment opportunities valued at R8bn across its core portfolio.
Despite the optimistic outlook, Grindrod expects to report lower full-year earnings after low commodity prices were compounded by Mozambique’s post-election protests.
The civil unrest which resulted in disruption at the Lebombo/Ressano Garcia border, cost the group R180m-R200m in headline earnings and 4.4-million tonnes a year in volume, according to a trading statement on Tuesday.
Added to this was lower commodity prices and low container handling throughput, with exports from Grindrod’s terminals declining to 16.5-million tonnes a year from 17.3-million tons previously.
As a result, headline earnings per share (HEPS) from the group’s core operations are expected to fall 25%-28% year on year.
Total HEPS is expected to be 43.7c-49.7c for the year to end-December, down 67%-71% compared with the previous year’s.
Aside from operational challenges, the fair value and expected credit losses stemming from the R500m disposal of the group’s noncore North Coast property-backed loans, plus R165.5m in provisions sold as part of the Grindrod bank deal, further detracted from overall earnings.
Some encouragement came from the group’s Maputo port-operated dry bulk terminal, which saw record chrome exports at 14.3-million tonnes a year, supported by high chrome prices during the period.
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