Grindrod cuts dividend by 55% due to border disruptions, lower commodity prices

Grindrod, the JSE-listed freight logistics company, saw its share price slump more than 6% on Thursday after reporting that core headline earnings fell to R1 billion last year from R1.4bn the year before due in part to border disruptions, lower commodity prices, and flooding.

The impact on the group of the intermittent Lebombo/Ressano Garcia border closures in the last quarter of 2024 was 4.4 million tons per year in volume and R200 million on headline earnings.

Overall performance was also impacted by lower commodity prices except for chrome, and the disruptive cyclonic flooding in the first half of the year, the group said in results released on Thursday.

The final dividend was cut a hefty 55% to 17 cents a share. The share price traded at R12.07 on Thursday afternoon, slightly lower than the R12.75 it traded at a year before.

“We aim to enter diverse markets, including liquid bulk, agricultural cargo, and various minerals. We have identified a growth pipeline that includes several logistics infrastructure-led investment opportunities,” said Grindrod CEO Xolani Mbambo.

The weaker results were despite the group positioning itself through a number of deals and initiatives to become a major operator and partner in several logistics infrastructure-led investment opportunities, including rail in South Africa.

Anchor Capital said in a note that although recent civil unrest in Mozambique was a concern, Grindrod's results were well guided, and its outlook was promising. The asset manager said potential logistics infrastructure investment opportunities could be worth R8bn at Grindrod - its annual turnover is R7.4bn.

The group was recently selected by Transnet to build and operate a container terminal in Richards Bay. It acquired the remaining 35% shareholding in the Matola terminal in Mozambique, while Grindrod Rail was gearing up to participate in South Africa’s rail open access strategy.

Mbambo said that they also aim to expand existing integrated logistics solutions by leveraging the terminals and rail capabilities.

For instance, the group’s Rail business was focused on refurbishing 13 locomotives repatriated from Sierra Leone, and it was also involved with various engagements ahead of the anticipated South African rail open access.

Grindrod’s current fleet consists of 44 locomotives and 88 wagons, but in Phase Two of its strategy, it would seek a new modern rolling stock fleet to increase reach in South Africa’s rail network.

The company was also enhancing service offerings through active partnerships with rail authorities for sustainable cargo flows.

In the past year, the group said it had benefited from record chrome exports of 14.3 million tons in Maputo Port, an increase of 14% on the prior year.

The container terminal operation in Richards Bay would require an investment amount of at least R500 million over 25 years. The acquisition of the remaining 35% shareholding in the Matola terminal for R1.43bn was well advanced.

Mbambo said they would be discerning in the transport and logistics corridors that they tender for, by evaluating opportunities against a set of criteria, including efficiencies, customer commitments, corridor understanding, and the impact on the overall returns across the logistics value chain.

“Our strategic infrastructure in key ports and inland facilities, experience in managing concessions, deep understanding of regional complexities, streamlined operations, high-performance culture, and agility to respond to market dynamics continue to make a positive difference in Africa’s trade with the world,” said Mbambo.

BUSINESS REPORT