Our opinion on the current state of GRINDROD(GND)Grindrod (GND) is an international freight and financial services company which operates in twenty-eight countries. In mid-June 2018, Grindrod unbundled and separately listed its loss-making shipping division (Grinship - GSH). This accounts for the "cliff" in the share price at that time. The company is now focused on its two remaining divisions - freight and financial services.
Grindrod owns the North-South railway line from Beitbridge to Victoria Falls as well as port terminals at Richards Bay, Natal, Walvis Bay, Namibia, and Maputo. The company is positive on the growth of its financial services division, which is about 30% of the business. It is focused on getting its retail banking division involved with small and medium-sized businesses.
The conflict in northern Mozambique is a problem for this share. The flooding in Natal caused five of their sites to be suspended for several weeks. In its results for the six months to 30th June 2024, the company reported revenue down 1% and headline earnings per share (HEPS) flat.
The company said, "Port of Maputo grew its own handled volumes by 18% to 6.9 million tonnes underpinned by strong demand for chrome. Grindrod's dry bulk terminals handled 8.4 million tonnes. Richards Bay volumes rebounded to 1.6 million tonnes for the period, reflecting a 20% growth on the prior period. Ships agency and clearing and forwarding businesses achieved strong headline earnings growth of 38% on the back of a higher customer base and port calls. This growth was, however, dampened by the continuing negative impact of logistics constraints on the container handling depot throughput and transport, resulting in the overall logistic earnings growth of only three percent."
On 6th November 2024, the company reported that it had closed down all its rail, port, and terminal operations in Mozambique because of the closure of the Lebombo border post due to violence on the Mozambique side. A few days later, on 8th November 2024, the company reported that the restrictions at Lebombo had been lifted - but the event showed Grindrod's vulnerability and exposure to unrest in Mozambique.
In a pre-close trading update on 19th December 2024, the company reported that the average price of its dry bulk commodities had fallen by 28%, but chrome, copper, and manganese were up 10%. The company said, "Gross debt as at 30 November 2024 was R3.1 billion (2024 June: R2.9 billion), an increase of R0.2 billion deployed mainly on bulk infrastructure and rail."
In a trading statement for the year to 31st December 2024, the company estimated that HEPS would fall by between 25% and 28%. The company said, "HEPS and earnings per share ("EPS") were impacted by the fair value and expected credit losses of R522.9 million which resulted from the disposal of the non-core North Coast property-backed loans for R500 million, and R165.5 million additional provision for warranties on specific non-core loans that were sold as part of the Grindrod Bank deal."
Technically, the share made a descending triple top between July and October 2024 and then began a sharp downward trend. The share then fell to a low of 1143c on 19-12-24 before beginning a recovery, which is ongoing. We expect the share to continue to perform well despite being volatile.
