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August 2007. 2007 Interim Results Shipping Markets Strategy Update Conclusion Annexures A : Market Value of Fleet B : Fleet Summary C : Shipping Market Report. INTRODUCTION. 2007 INTERIM RESULTS. EARNINGS FROM SHIPS. Owned & Long -Term Chartered. INCOME STATEMENT.
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2007 Interim Results Shipping Markets Strategy Update Conclusion Annexures A : Market Value of Fleet B : Fleet Summary C : Shipping Market Report INTRODUCTION
2007 INTERIM RESULTS
EARNINGS FROM SHIPS Owned & Long -Term Chartered
BALANCE SHEETIncluding Revaluation of Fleet to Market Value See Annexure A for detail on revaluation of fleet to market value
SHIPPING MARKETS – DRY BULK • Comments • Continued demand for commodities • Newbuildings not meeting demand • Port delays • Creation of new trade lanes • Good long-term outlook BULK CARRIER – NEWBUILDING PRICES BULK CARRIER – 1 YEAR TIME CHARTER RATES
SHIPPING MARKETS – PRODUCT TANKERS • Comments • Relatively stable as expected • Mid-range ships • Balanced supply and demand • Smaller ships • Undersupplied • Market outlook • Cautious in short-term • Stronger longer-term outlook • Legislation requirements • Scrapping
Shipping Services Shipping markets continue to be firm (but higher than expected) Continuing to focus on areas of expertise Fleet expansion in under-invested sectors Ordered 2 x 16 500 dwt product tankers Ordered 3 x handysize bulk carriers Sales contracted for 2 x 12 800 dwt product/chemical tankers Continue to add to long-term contract cover STRATEGY UPDATE
Trading operations now bedded down Freight Services Greater focus on infrastructure investment Restructure into distinct divisions completed Terminal Development Maputo (R100m capital commitment) Ferroslab Terminal – operational August 2007 Car Terminal – operational December 2007 Coal Terminal upgrade – complete December 2007 Bulk Liquids facility – complete October 2007 Further terminal opportunities under negotiation TRADING, FREIGHT & FINANCIAL SERVICES
Terminal Development (continued) Richards Bay Terminal expansion (R168m capital commitment) – complete June 2008 Maydon Wharf Facility expansion (R59m capital commitment) – complete October 2007 Sold 6 locomotives – commercial decision Other acquisitions 50% in Vanguard Rigging (Heavy logistics) Tate & Lyle Molasses South Africa (Bulk liquids) Remaining 50% in Boltt Grindrod Remaining 50% in CMC Grindrod Grindrod Bank Performing according to plan Net 1 initiative taking shape TRADING, FREIGHT & FINANCIAL SERVICES
International Listing/Unbundling Have completed investigation Will revisit when: Freight Services properly established Capital required Black Economic Empowerment Concluded Grindrod Bank transaction Freight Services BEE ownership transaction is in progress STRATEGY UPDATE
Shipping Long-term charter rates/ship prices indicate expectation of a firm shipping market in the medium-term Contracted growth in fleet (35% - detail in Annexure B) Contracted earnings at good levels (last 6 months 2007 = 89%; 2008 =58%; 2009 = 32%) Trading, Freight and Financial Services Well positioned for growth Focus on infrastructure Will take advantage of regional growth CONCLUSION
Rm Excess of market value over book 1 266 value of owned ships Value of long-term charters 3 483 Value of ship purchase options on 1 304 chartered ships 6 053 Indicative values obtained in consultation with reputable ship brokers Differential between Grindrod charter rate and current rate to replace charter i.e. does not include expected profit PV @ 8% (USD WACC) converted at closing exchange rate Projected value of ship at end of charter compared to option strike price PV @ 8% (USD WACC) ANNEXURE A Market Value of Fleet • The group valuation should consist of: • The analyst’s valuation of Grindrod’s SA based operations • A valuation of the international shipping operation taking into account the fleet value, comparison to peers and the analyst’s estimation of the group’s ability to extract value from its shipping fleet