1 2007 results presentation. 2 agenda 2007 results overview of 2007 activities shipping trading...

1

2007 RESULTS PRESENTATION

2

AGENDA

• 2007 Results

• Overview of 2007 activities

• Shipping

• Trading

• Freight Services

• Financial Services

• Conclusion

3

2007 RESULTS

Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities

4

INCOME STATEMENT

2007 2006 Comments

Shipping (US$ million)

Profit from owned and long-term chartered ships 160 89 Higher shipping revenues/increased fleet size

Loss/profit from ship operating activities (14) 14 Parcel service losses

Profit from ship sales 27 35

Overheads/forex/other interest/tax/preference dividends (35) (11) Increased interest costs, lower forex profits

138 127

Shipping (R million) 982 867

Trading 63 24 Improved performance by Atlas

Freight Services 189 93 Significant improvement in rail, terminals, intermodal and seafreight divisions

Financial Services 36 15 Increased equity, growth in deposits, advances and assets under management

1 270 999

Disposal adjustment (75) 9 Closure of PicPack Grindrod

Profit attributable to ordinary shareholders 1 195 1 008


5

PROFIT FROM SHIPS

Bulk carriers Tankers Total

2007

Total

2006

Handysize Panamax Capesize Chemical Mid-range

product

Daily revenue (US$/day)

21 100 21 000 45 000 14 300 20 200 23 000 17 800

Daily cost

(US$/day)

8 400 9 300 21 000 9 400 15 600 11 400 11 200

Number* 19.1 2.0 4.9 5.6 6.4 38.0 36.7

Profit (US$m) 89 8 43 10 11 160 89

Owned and long-term chartered

Shipping Trading Freight Services Financial Services Conclusion2007 results

* Ship equivalents: operating days divided by 365

2007 Activities

6

BALANCE SHEET – 31 DECEMBER 2007

2007

Rm

2006

Rm

Comments

Ships (owned and chartered at market value) 13 847 10 190 Increased market value of ships/fleet growth

Other fixed assets/investments 1 983 1 420 Freight Services expansion

Bank loans, advances and liquid assets 1 195 680 Growth in the Bank

Current assets 3 080 2 238 Increased working capital requirement for Trading

Total assets 20 105 14 528

Equity 11 283 7 165 Retained profits and higher mark to market values

Net book debt 848 593

Capitalised charter obligations 3 879 4 151 PV of long-term charter obligations

Bank deposits 1 397 711 Growth in the Bank

Other liabilities 2 698 1 908 Growth in financial instruments and Trading creditors

Total equity and liabilities 20 105 14 528

Adjusted debt/equity 0.42:1 0.66:1


Including ship revaluations and with chartered fleet capitalised

2007 Activities

7

MARKET VALUE OF FLEET

Rm

Book value of owned fleet 2 125

Excess of market value of owned fleet over book value

1 601 Indicative ship values obtained in consultation with reputable ship brokers

“Book value” of charters with purchase options

3 879 “Book value” = PV @ 7% of capital element (i.e. excluding running costs) of charter commitments and purchase option price. Yen options valued at closing rate

Excess of market value over “book value” of charters with purchase options

6 357 Indicative ship values obtained in consultation with reputable ship brokers

Market value of other long-term charters and contracts

(115) Differential between market rates and Grindrod charter/contract rates. PV @ 7%

13 847

Based on 2007 closing Rand / US Dollar exchange rate of R6.89


8

Dividends per share

46

8

12

35

52

66

78

0

10

20

30

40

50

60

70

80

90

2000 2001 2002 2003 2004 2005 2006 2007

Cen

ts

Interest cover

2.0

3.4

5.6

4.2

9.7

10.7

15.9

10.5

0

2

4

6

8

10

12

14

16

18

2000 2001 2002 2003 2004 2005 2006 2007T

imes

co

ver

KEY FINANCIAL RATIOS


9

KEY FINANCIAL RATIOS


Return on ordinary shareholders' funds

16.1

20.2

26.7

42.4

75.774.6

57.2

50.8

0

10

20

30

40

50

60

70

80

2000 2001 2002 2003 2004 2005 2006 2007

Per

cen

tag

e

Cash v Headline earnings per share

342

263

1631

34 46

165

214

307

221

185

121

50

35

2513

0

50

100

150

200

250

300

350

400

2000 2001 2002 2003 2004 2005 2006 2007C

ents

Cash Earnings per share (cents)

Headline Earnings per share (cents)

2007 Activities

10

OVERVIEW OF 2007 ACTIVITIES


11

SHIPPING

• 33% revenue growth, 13% earnings growth

• Strong drybulk markets

• Stable tanker market

• High level of contract cover during year

• IVS Parcel Service losses – offset by high spot earnings in pool

• Forex loss of R10 million due to stronger Rand/ US Dollar closing rate (2006: R53 million profit)

Business focus

Owner/operator

Drybulk

- Handysize

- Panamax

- Capesize

Tankers

- Mid-range product

- Small product

- Chemical

Total fleet in excess of 70 ships


12

SHIPPING

• 4 ships sold – profit of R195 million (2006: R239 million)

• Ordered 8 ships

• Took delivery of 5 ships

• Contracted sale of 2 ships. Planned sale of further 2 non-core ships

• Fleet of 39 ships (excluding bunker barges) will increase to 51 by end of 2011

• Merged Unicorn / IVS into a single entity

• Favourable contract renewals by IVS Parcel Service


13

TRADING

• 36% revenue growth, 158% earnings growth

• Improved margins

• Strong demand for commodities

• Improved performance by Atlas Trading and Shipping

• High commodity prices – increased working capital requirement

• Upstream investment in chrome production facilities and 25% interest in a manganese mine through 50% holding in Oreport

Business focus

Agricultural commodities

- Maize, wheat, soya

Mineral commodities

- Chrome, coal, stainless steel, manganese

Bunkers (fuel) etc


14

FREIGHT SERVICES

• 37% revenue growth, 103% earnings growth before disposal adjustment

• Disposal adjustment – closure of PicPack Grindrod fully provided for

• Restructure completed

• Ports and Terminals, Intermodal, Rail, Seafreight and Ships Agency performed well

• Logistics affected by strikes and business closure

Business focus

Ports & Terminals

Intermodal

Logistics

Rail

Seafreight

Ships Agency


15

FREIGHT SERVICES

• Concluded BEE joint venture – tanker operations / bunker barges

• Expansion:

– MPDC / Maputo Coal, Car and Ferrochrome Terminals

– Increased bulk road transport fleet

– Acquired bulk liquid storage facilities

– Acquired 50% of Vanguard (heavy logistics)

– Terminal developments – Dar es Salaam, Richards Bay, Walvis Bay, Luderitz, Maydon Wharf (Durban)


16

FINANCIAL SERVICES

• 133% earnings growth

• Significant growth in deposits (93%), advances (127%) and assets under management (247%)

• Benefits from introduction of additional capital

• Concluded BEE transaction

Business focus

Corporate Banking

Corporate Finance

Structured Products

Retail – Smart Card


17

SHIPPING


18

SHIPPING MARKETS


BULK CARRIERNew Building Prices

0.00

20.00

40.00

60.00

80.00

100.00

120.00

US

$ m

il

170K DWT Capesize Bulkcarrier New building Prices 120K DWT Capesize Bulkcarrier New building Prices 75K DWT Panamax Bulkcarrier New building Prices

23/30K DWT Handysize Bulkcarrier New building Prices 32/35K DWT Handysize Bulkcarrier New building Prices

BULK CARRIERSecond Hand Prices (5 yr)

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

US

$ m

il

Capesize 170K 5 Year Old Secondhand Prices Panamax 73K Bulkcarrier 5 Year Old Secondhand Prices Handysize 25K-30K 5 Year Old Secondhand Prices

BULK CARRIER1 Year Time Charter Rates

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

US

$ p

er d

ay

1 Year Bulkcarrier Timecharter Rates 150,000 dw t 1 Year Bulkcarrier Timecharter Rates 170,000 dw t 1 Year Bulkcarrier Timecharter Rates 65,000 dw t

1 Year bulkcarrier Timecharter Rates 70/72,000 dw t 1 Year Bulkcarrier Timecharter Rates 30,000 dw t

2007 Activities

19

SHIPPING MARKETS


20

0

50

100

150

200

250

<=

19

75

19

77

19

79

19

81

19

83

19

85

19

87

19

89

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

20

09

20

11

20

13

Year of build

No

of

sh

ips

Exis ting fleet On order

0

20

40

60

80

100

120

End 07 End 08 End 09 End 10 End 11

No

of

sh

ips

20-25 25-30 30+

SHIPPING MARKETS


Capesize fleet profile – expanding fleet

2007 Activities

No of ships Dwt

Existing fleet 775 133,253,676

NB total 624 116,517,380

% of Fleet 81% 87%

% over 30 years 0% 0%

21

0

50

100

150

200

250

<=

197

5

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

Year of build

No

of

ship

s

Existing fleet On order

SHIPPING MARKETS


Handysize fleet profile – declining fleet

408

544590 614

659

113 130169

310 310

0

100

200

300

400

500

600

700

800

900

…end 07 …end 08 …end 09 …end 10 …end 11

25-30 30-35 35+

No of ships Dwt

Existing fleet 2,835 75,652,728

NB total 598 18,535,826

% of Fleet 21.09% 24.50%

% over 30 years 23.63% 21.54%

2007 Activities

22

MARKET OUTLOOK

Drybulk

• Fundamentals remain strong with the East driving the drybulk markets

• Recent downturn in spot rates caused by a number of short-term factors (delay in ore price agreements, Brazilian port down time, etc.)

• Market has recovered substantially with limited effect on long-term charter rates and ship prices

• Continued growth in cargo movement – China still a big driver with India adding momentum to increased demand


23

MARKET OUTLOOK

• Growth in coal / iron ore movements will offset capesize fleet growth in short-term but expect normalisation towards end of 2009 as newbuildings deliver

• Increased scrapping expected as scrap steel prices remain high

• Handysize market still has very good fundamentals - an old fleet and a growing demand for these ships

• Limited impact from slow down in world economy expected


24

MARKET OUTLOOK

Tankers

• Continued growth in demand:

– Slow down of growth in West offset by increased demand in East (China / India)

– Refining capacity to be built in supply areas, resulting in increased tonne miles

• Legislative / environmental restraints will force scrapping of older vessels


25

MARKET OUTLOOK

• However, still possible oversupply of larger product tankers from big order book in short-term

• Small product and chemical tanker markets have more favourable outlook:

– Old fleet (30% single hull) and limited newbuildings due to yard capacity constraints

– Increased demand from regional trades and feedering requirements

– High stainless steel prices limit further substantial investment in the chemical sector


26

STRATEGY

• Capesize / panamax:

– Expand cover from 2010 through growing cargo base / re-let of panamax

• Handysize / handymax:

– Maintain some open position

– Parcel Service contracts – index linked or hedge to lock-in margin

– Expand ship operating capability

• Products tankers:

– Increase cover in 2009 / 2010 as new ships deliver


27

STRATEGY

• Chemical tankers:

– Continue to employ in the joint service to take advantage of anticipated growth in market and market position

• Vessel acquisition:

– Limited in short-term due to high pricing

– Will look for opportunities to grow handysize fleet

• Any future weakness – buying / expansion opportunities


28

FLEET OVERVIEW

Contracted in at 31/12/2007 Bulk carriers Tankers Total

Handysize Panamax Capesize Chemical Mid-Range

Small

2008 Number 20.5 2.0 4.1 4.0 7.5 1.0 39.1

Cost (US$/day) 8 700 9 200 20 000 14 800 13 400 8 500 11 400

2009 Number 18.0 2.0 3.0 4.0 9.3 3.4 39.7

Cost (US$/day) 8 400 9 200 21 500 14 700 13 400 9 200 11 300

2010 Number 18.3 2.0 3.0 4.0 10.0 6.6 43.9

Cost (US$/day) 8 400 9 200 21 000 14 700 14 300 10 000 11 500

2011 Number 19.5 2.0 3.0 4.5 10.0 9.5 48.5

Cost (US$/day) 8 400 9 200 27 800 14 700 13 800 10 200 11 700

Current fleet 21 2 5 4 6 1 39

Net Number of Ships to Deliver

2008 -2 - -1 - 2 1 -

2009 -1 - -1 - 1 3 2

2010 1 - - - 1 4 6

2011 2 - - 1 - 1 4

Fleet at end of 2011 21 2 3 5 10 10 51


NB: excludes short-term chartered and ships operated in Freight Services. These total +/- 30 ships

9 owned

30 chartered

20 owned

31 chartered

2007 Activities

29

CONTRACTED PROFITS

Contracted out at 31/12/2007 Bulk carriers Tankers Total

Handysize Panamax Capesize Chemical Mid-Range Small

2008 Number (average)

Revenue (US$/day)

15.2

24 500

2.0

20 900

3.5

35 100

2.0

19 800

6.1

20 700

0.9

12 000

29.7

24 000


Revenue (US$/day)

2.4

19 800

2.0

20 800

2.4

37 300

1.5

21 700

6.2

20 600

1.5

14 800

16.0

22 600


Revenue (US$/day)

0.2

17 000

1.2

20 700

1.4

40 200

-

-

5.7

20 500

1.5

14 800

10.0

22 400


Revenue (US$/day)

-

-

1.0

20 600

1.9

40 300

-

-

2.4

22 000

1.1

15 000

6.4

26 000

Contracted profits (US$m) % of fleet

fixed

Charters

US$m

Ship sales

US$m

Total

US$m

2008 75 132 46 178

2009 45 53 - 53

2010 29 32 - 32

2011 21 20 - 23


In addition, +/- 10% of fleet is fixed from 2012 to 2015

2007 Activities

30

TRADING


31

MARKET OUTLOOK

• Growing demand for commodities:

– Food and feed requirements

– Bio fuels

– Steel production requirements

– Shipping requirements for bunkers

– General world economic growth particularly in the East

• The growth / demand is expected to continue in the long-term


32

STRATEGY

• Consolidate under a new Trading CEO

• Cautious investment in origination and infrastructure

• Co-operation with Freight Services and Shipping


33

FREIGHT SERVICES

Shipping Financial Services Conclusion2007 results 2007 Activities Trading Freight Services

34

MARKET OUTLOOK

• Continued demand for commodities from sub-Saharan Africa

• Catch-up required in infrastructure spend:

– Ports

– Terminals

– Rail


35

STRATEGY

• Further simplification and streamlining of the divisional structure:

– Ports and Terminals

– Intermodal and Logistics

– Rail

– Seafreight

– Ships Agencies

– SA ship operations / bunker barges


36

STRATEGY

• Exit from non-core businesses

• Expand port and terminal investments in Maputo (MPDC), Richards Bay, Durban and Walvis Bay

• Bring on-stream potential new terminal projects

• Refocus rail strategy

• Black Economic Empowerment


37

FINANCIAL SERVICES


38

MARKET OUTLOOK

• Continued economic growth in SA

• Banking sector impacted by sub-prime crisis, higher interest rates, National Credit Act

• Substantial infrastructure and commercial investment requirements

• Opportunity for a well structured niche bank in the SA market


39

STRATEGY

• Grow deposit base

• Focused, secure lending book

• Generate annuity income from:

– Asset management

– Investment products

– Retail fees (Net1)

– Treasury management

– Advisory

• Brand roll out with more visible market presence


40

CONCLUSION


41

CONCLUSION

• Four distinct operations: Shipping, Trading, Freight Services and Financial Services

– No significant synergies– Different risk profiles– Management focus essential

• Future unbundling / disposal / merger / international listing of shipping all under consideration

• Timing to be triggered by need for capital / market conditions

• Improve shareholder value through:

– Attracting specialised investors– No conglomerate discount– Simplified operations / easier to analyse– Broaden shareholder base


42

CONCLUSION

Sound prospects

• Shipping:

– Long-term charter rates / ship prices indicate expectation of a firm shipping market in the medium-term

– Contracted growth in fleet = 30%– Contracted earnings (2008 = 75% of fleet fixed, 2009 = 45%, 2010 = 28%) – Expectation of weakening of Rand (10 cent move = estimated R20 million income

statement impact)

• Trading, Freight Services and Financial Services well positioned for growth:

– Capacity to invest in expansion– New projects coming on stream

• Focus on ports and terminal business

• Successful, experienced management team


1 2007 results presentation. 2 agenda 2007 results overview of 2007 activities shipping trading...

Documents

share centsheadline

ship equivalents

revenue growth

operating days

activitiesbalance sheet

yearivs pa