Grindrod plans to offload locomotive assembly business

18 Aug 2016

Infrastructure and shipping business Grindrod's share price dropped more than 4% on Wednesday as the Durban-based firm said it would report a loss in the six months ended-June. Grindrod has decided to sell its locomotives assembly business "due to the continued state of the market".

bernswaelz via pixabay

The company announced an impairment of R675m in its rail business. Included in the impairment is R379m in goodwill and intangible assets arising from Grindrod's 2014 empowerment deal.

When it publishes its financial report next week, it will report a loss of up to R1.15bn (equivalent to 154c a share). That compares with a profit of R302m and 40.02c per share over the same time last year.

Grindrod offers what it calls a "full suite of rail services, from locomotive manufacturing and line operations to track construction" through subsidiaries located in SA, Mozambique, Zimbabwe, and nine other countries in Africa.

The company has not given any disposal details. The company, founded by John Grindrod in 1910, said its freight service businesses had been affected negatively by the weak commodities market.

A strong performance by its flagship tanker and ship operating businesses mitigated the effect of the weak trade in the rail and dry-bulk shipping. There was more good news "The dry-bulk shipping market has recovered from the historic lows in the first quarter, with rates now well in excess of operating costs," Grindrod said.

The financial services operation, which includes Grindrod Bank, was one of the few performers in the group.

The depressed global economic activity, which resulted in low shipping activity and rates over the past two years, has had a negative effect on Grindrod's share price. From a high of more than R28 a share early in 2014, Grindrod dropped to a low of R9 in February, before recovering to R12.36. It mirrors the decline in the price of oil, which is one of Grindrod's main cargoes, from 120 a barrel to $49 a barrel.

Source: Business Day

Source: I-Net Bridge

For more than two decades, I-Net Bridge has been one of South Africa’s preferred electronic providers of innovative solutions, data of the highest calibre, reliable platforms and excellent supporting systems. Our products include workstations, web applications and data feeds packaged with in-depth news and powerful analytical tools empowering clients to make meaningful decisions.

We pride ourselves on our wide variety of in-house skills, encompassing multiple platforms and applications. These skills enable us to not only function as a first class facility, but also design, implement and support all our client needs at a level that confirms I-Net Bridge a leader in its field.

Go to: http://www.inet.co.za