Saturday, October 1, 2022

Grindrod delivers again – CEO Andrew Waller with back story to booming JSE stock, reckons there’s more to come

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Investors got the fireworks they expected from Grindrod in the half year to end June, and despite a share price that has already trebled this year – the market rewarded the stock with another price increase. In this interview, CEO Andrew Waller talks to Alec Hogg of BizNews about his four year journey alongside former chairman Mike Hankinson (who retired in June), where their strategy was to streamline the business, sell off non-core assets and find a partner for Grindrod Bank (sold for R1.5bn to African Bank). He also talks highly about his CFO Xolani Mbambo, who takes over when Waller departs in January, explaining why he believes there’s plenty more to come from the century-old KZN group.

On Grindrod’s share price growth this year, with revenue now up 31% and headline earnings up 53%

It was really important that we got back to our core and that talks about freight services as well as what we called for a number of years, the non-core assets. The non-core assets, unfortunately, were always attracting debits because we were trying to exit these businesses in the middle of the pandemic. And it wasn’t easy. But quietly, while we were dealing with the non-core, Xolani was getting on with freight services and making sure we focused on the customer, understanding where they need to go, at the heart of the country or the subcontinent. And yes, we have seen some tailwinds with mining and agriculture, which we are so fortunate to have in sub-Saharan Africa, which seem to be much more resilient during these uncertain times.

On what is left of Grindrod’s non-core business after unbundling efforts

You know, we’ve done a hell of a job. You’ll remember we had to split out the private equity from the bank and that had a number of businesses in it. And we’ve been through a process with the team to sell off a lot of those businesses and largely to the other owner or the other owners, because you find it very difficult to sell to another party, who the owner doesn’t know, you know, and not being able to get top dollar because you’re in a Covid scenario, that’s been quite stressful for us, but a lot of that now is gone. We’ve got one left to go and that’s looking positive. And then we call them non-core, marine fuels. You remember that was a big part of our business when we had the shipping business as well. That business is still doing well and we haven’t managed to find a buyer for it. So obviously we’ve got to go back to the drawing board and see. Luckily it’s a good business making good money, so it’s not a drain on us. And then we have an exposure to some land up the north coast. But these non-core assets are not costing us. They’re not a drag on us, they don’t have debt against them anymore. We hope we can convert them into cash in the short term, but it will be in Xolani’s time- frame that we’ll get through, through the land and the marine fuels.

Looking ahead, does Grindrod need the mineral commodity pipeline to continue performing, given the much higher base of operation now

For years and years, people have measured us against the mineral markets. And harking back to a few years before, with rand dollar exchange rates, mining, commodity prices, and sure, if coal drops and iron ore drops to 50, it will make a big dent because that’s a lot of what Matola is about. But therein lies Xolani’s efforts over the last while, lots of work on manganese, chrome and graphite, and that’s just in the mineral space. As you’ve seen, we’ve got the tie up with Maersk on the citrus side. So a lot of work on containers to work with citrus. And then, as you know, it pushes up into East Africa. We have a couple of projects in East Africa that’ll get us into more of the cargo space as well. So absolutely, we are tied to minerals. We’re very fortunate at the moment, as you said at the outset, but a lot of work is being done on diversification. We not too affected by an iron ore price that may come off, which has been very volatile recently, and we’ve been fine. But at the moment, as you know, everyone is trying to find space to get the product into ships. So we’re very fortunate at the moment.

On the main topics of interest for investment analysts from the results presentation

As you would expect, they all want to know when they can get their hands on the 1.5 billion rand that African Bank are going to pay us for Grindrod Bank. It’s very presumptuous to assume that we are going to clear all the hurdles. We have our shareholder approval at 99%, which we expected. But as you know, we’ve received a couple of rounds of questions from the Competition Commission and the Reserve Bank. We’ve answered all of those, and don’t expect there to be problems, but we don’t want to be too presumptuous. And then there’s a lot of work for us to do around what projects we have, when they’ll happen and how much of that 1.5 billion we use for what. And the board has asked us to come back in November with quite a comprehensive plan on that. So that was one of the questions. The other big question was around how much more we can bring on stream to get coal out of the country at times of such highs. And of course, we’ve been working with all sorts of parties to try and help with the export of their product at the moment.

On the handover, succession planning and future of the Grindrod business

I think it’s right for the business. You know, it’s a good position to be in. And it’s a good time to refresh the team and to have people that have been with us along the way, who understand some of the obstacles we have to overcome to get to where we are. If I go back in his history, Xolani was at Anglo Coal, so he knows the coal mining industry backwards, he’s been a miner essentially. So, I mean, it was always our intention to get to a position where these three businesses stand on their own and are successful. You know, it took us, I don’t know, nearly ten years to find the right partner for our bank. We ourselves as management, our board and our shareholders would never allow a bank to go to someone that we didn’t think was appropriate at the time. So that’s why it took so long and happened when it did. As it happens, I think it’s a really good time for us to get out of the way and for Xolani and Cheryl to take on the responsibility of making sure that we succeed. Grindrod is an amazing organisation that can really help sub-Saharan Africa. And in fact, we stretch all the way up to the Congo, and we are doing projects in Lake Victoria and Uganda. There’s a lot for us to do in Africa. And I know it’s a cliché, but we really do believe that the time for Africa is here and we need to make sure that the value we can bring to the world we can help participate in. It is an exciting time for us.

Read also:

  • A first-of-its-kind transaction: Grindrod Shipping’s corporate restructure and listing

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