Grindrod weathers economic storm

Johannesburg - Grindrod [JSE:GND] 's strong balance sheet has enabled the Durban-based shipping firm to weather the severe downturn in the market.

Releasing results for the year to end-December on Thursday, Grindrod's gearing stood at 4%.

"Shipping is a very cyclical business and a lot of the companies can over-leverage themselves," said Simon Fillmore. "When things go wrong, leverage is their archilles heel."

He said Grindrod's low gearing should be applauded in the current market conditions. Shipping worldwide was hit by depressed demand and resultant lower trading volumes.

Grindrod's headline earnings per share were 63% lower at 189.6cents/share for the reporting period. Revenue declined 18% to R27.7bn.

"It was a very difficult year," said group CEO Alan Olivier. "Times were uncertain but we were well positioned."

Drop after 'super profits'

Grindrod's shipping division - which deals with wet and dry cargo - is now contributing around 55% to the company's bottom line. One year ago, shipping made up around 90% of earnings. The group other divisions - trading, logistics and financial services - have helped cushion the group to an extent.

Grindrod managed to maintain the dividend cover at 3.2 times (December 2008: 3.5 times) and distributed 60c/share in full-year payout.

"We are very comfortable with liquidity and our balance sheet, so we are confident to pay out this dividend," said Olivier. "But I am not saying that we will maintain this cover. We will review the situation next year."

Olivier said the company has a credit line of R9bn to spend on expansion over the next two to three years. Acquisitions will not be made hastily and Olivier has stressed that the timing must be perfect.

Grindrod expects all divisions to benefit from renewed commodity demand this year, particularly from iron-ore and coal.

"If you are bullish on commodities, you have to bullish on Grindrod," said Fillmore.

- Fin24.com