Key message: Medium-term growth projects should add to the steady growth of the Port of Maputo.
- Grindrod reported FY24 results. Core segmental EBITDA declined by 20% (core segmental EBITDA margin falling to 27% from 34%) and core headline earnings at 150c was down 26% (with a 30c impact from the Mozambique unrest around the port – normalised Core Heps was 180c). Reported headline earnings of 46.7c was impacted by fair value losses impairments in private equity and property (R460m), expected credit losses (R96m) and warranties provided to the bank (R166m). A final dividend of 17c was declared (total dividend 40c).
- Ports & Terminals: The Port of Maputo (MPDC) grew volumes by 14%. Sub-concessions at the Port of Maputo saw a volume decline of 11%. Terminal volumes decreased by 5% with a 24% increase in Richards Bay volumes (positively impacted by the conveyor belt repair) offset by a 27% decline at the Maputo terminal and Matola volumes declining by 9%. Grindrod lost 4.4mt to the unrest in Mozambique in the last quarter. Segmental revenue declined by 13%. The segmental EBITDA margin declined to 38% (from 44%), impacted by heavy rains in March/April which caused increased costs due to wet stockpiles and lower volumes, the higher margin mineral export business coming to an end and the impact of the unrest in Mozambique.
- Logistics: The ships agency and clearing and forwarding saw headline earnings of 10% with new contracts and increased passenger ship servicing. Logistics was impacted by lower container volumes. The rail business has been restructured with an exit of Railco Africa. Segmental revenue increased by 21% boosted by cross-border transport revenue from new pit-to-port integrated contracts (while offering full suite of services to the customers the transport brokering margins are lower). The EBITDA margin fell to 21% (from 31%).
- Non-core assets: The property portfolio is in the process of being sold for R500m. The book value of remaining non-core businesses is approx. R846m (private equity and portfolio R169m, Marine Fuels R677m).
- Grindrod remains well positioned for the growing opportunity in private sector participation in ports and rail. Growth in the medium term will come from the Matola expansion (9-12mtpa) and 35% buy-up, potential rail slots and container operations at Richards Bay. A Transnet recovery is in general positive as it would increase port and container volumes. We increase our Target Price for Grindrod to R17.70 (from R16.60).