Grindrod Limited (GND) Earnings Call Transcript & Summary

[Audio Gap] services, logistics and financial services. There's lots to talk about, so I won't spend much of your time other than to thank Grindrod. I have the whole team here, the Chairman through to the people who are responsible for the various divisions to talk to us. And so on behalf of the society, I'd like to thank them for this occasion and that we get a chance to hear the presentation, and we can also network with the people involved through the course of the presentation and afterwards. So many thanks, indeed, and I'll hand over to you, Andrew, to get the presentation going. Thanks, Andrew.

Thank you, everyone, for spending the time with us. Before we start, just to introduce a few Board members, important people in our lives. Zimkhitha Zatu, sitting in the front on the left, has just joined our Board; along with Ben Magara and Walter Grindrod, so they're the new members that have come on to our Board. We have to say goodbye to Sandile Zungu, who's done his 9 years; Raymond Ndlovu, who's been put into another Remgro subsidiary company. We've also got 2 of our very important Bank Nonexecutives sitting in the front here, Amanda Dambuza and Zola Malinga. Thank you for making the time to be with us. And any difficult questions, I know where they're going. We've -- but upfront there, we've got Mike, who you know is our Chairman, Mike Hankinson; Xolani Mbambo, our Finance Director; and Dave Polkinghore who runs the Bank; and I'm Andrew Waller. We've also got a number of the execs in the audience today. So plenty of time to ask them questions afterwards, and I'm sure that they'll be more than capable in answering any of your questions. Before we start, I just want to run through a little video I kept that gives you an idea of the type of businesses that we are involved in. And at the end, we've put a few slides of some of the things that we're very proud of having achieved during the year. And of course, I'll speak a bit more to that as well the others on -- in the presentation. [Presentation]

So you got a quick glimpse of what we get excited about. So if we go on to the presentation and before Xolani gets into the numbers, I'd just like to spend a little bit in the business environment for 2019 and the strategy, and then we'll get into the numbers. So the business environment 2019 dominated, from our perspective, by the trade war, China-U.S. because a lot of what we do is governed by the global markets, especially in the mineral space. So very much an overriding factor for us to understand where the magnetite is going, where the coal is going, where the chrome is going and what's coming back into the country. All of our business was affected by that. And then in Southern Africa, as you've seen in our map, and you'll see our map often during the presentation, in the countries that we operate in, South Africa, very poor growth; Zimbabwe, negative, Xolani will touch on a bit of that maybe; Zambia, flat. The only country in our area that's showing good signs is Mozambique. So that's kind of the backdrop for 2019 that the team managed to produce the results against. If I touch on the strategy, essentially, what we said to ourselves at the beginning of the year, and I mentioned a bit of this at the half year, we relooked at freight, and we said we're going to contemplate on the corridor, make sure we develop solutions with our customers and extend the supply chain. And I'll touch on that a bit later. In the bank, we focused on the platform banking, the growth of SME, and that's a real focus area for Amanda and David in the years ahead. So if we go into strategy on freight, and I said you'd see this again a few times, essentially, now we're operating in 4 business clusters essentially. We've got the Port and Terminals business, and a clear focus on that business is to extend our capacity and to diversify. We had a great year, and you'll see from the numbers. On the container businesses, there, we have extended our capability. We've extended our footprint. And we've added, as you saw on the previous slide, some more ships. Northern Mozambique, we've spent, as you know, probably nearly 10 years up in the Northern Mozambican area, waiting for the gas to come. In the meantime, while we have -- while we await the award of the tender for the clearing and forwarding on the actual main gas trains. And with some pieces, so we're still in the -- we've got through to the next round again. We've developed the site in Nacala where we are running graphites from Balama. And we want to now extend that supply chain into Malawi, and in fact, you can get into Zambia at Chipata. So extension of that supply chain, really important to us from a strategic point of view and make sure that we've got a platform in place to service all the logistics requirements that are needed in the norther gas -- Northern Mozambique oil and gas development. North-South Corridor, we almost have 70 locomotives under our control at the moment because we bought back 24 from Sierra Leone. So the capability is there. We have to work with the freight partners to get that freight onto the rail and make sure that North-South Corridor works for us. So lots of strategic work around aligning all of those. On the bank, a significant amount of work undertaken by David and Amanda. A refresh of the Board, introducing more management, proper, good strong management team at the executive level. We injected another ZAR 100 million, as you know, in equity to keep the growth going in the bank. Lots of development work on the IT side on the retail platform. So a very strong review of what our services are that we are offering from the bank. And then, as you know, at the half year, I announced how we had pulled the private equity portfolio out from the bank in order that the bank can focus directly on banking. So good focus and strategies coming through on the bank. Xolani, do you want to hand over?

Yes. Just getting on to the numbers. I know that at the interim last year, I ended up lecturing on IFRS 16 and the restatements, and I'm not sure of the crowd how many could follow. So what I've tried to do this time around is really to focus on how the business has performed and how the issues are. I'm quite pleased to say that the earnings are positive, and they're in line with what we issued in our trading statement. If there are any specific IFRS items that I did not speak to about, you can catch me after the presentation. So we achieved revenue growth, which is quite pleasing, and that's on the backdrop of good volumes. It's on the backdrop of Nacala operations, which has -- running for the full year. You'll recall that we implemented that project halfway through 2018. It's also in the backdrop of increased project activities in South Africa and saw us achieving 12% growth. What it is even more pleasing is that on the margins, we're in a position to actually marginally do better than last year, sitting at 27% compared to 25% last year. So it's quality revenue that's coming on stream. We had our infrastructure upgrades and additional equipment, and that's what added to our depreciation charge, as you can see it's growing 8%. As part of cleaning up our structure in Mozambique and integrating our capital operation into MPDC, we've had to take some debit on our non-trading items of ZAR 97 million there. And we had to wash some FCTR debit into the income statement. Just to remind you, last year, that ZAR 483 million related to the rail impairments, which we explained in the previous results. Moving on to the interest income, it dropped by 37%, not really a good picture. Main reason for that, which I did explain in the past as well, is in the back end of 2018, we had our BBEE structure where we received interest. Because we saved that structure a couple of times, we've had to then consolidate it at the end of 2018, which meant that we needed to bring the external debt funding of this structure in our balance sheet. And in 2019, we therefore incurred an interest, so that added to our ZAR 299 million. We also saw a reduction -- so on the interest income, we also saw a reduction in the net interest because a large chunk of our cash, about 60% of our cash sits offshore in Malaysia, and it's not earning the rates that you'd like to see. So what we're doing currently is we're working to repatriate that cash into South Africa so that we can create a sufficient headroom to save on the interest expense and improve the interest income. I will touch a bit on the joint venture earnings on the next slide. One interesting item that you'll see there is my tax number, which is currently sitting at positive ZAR 9 million. The good work that's been done by our terminal colleagues in Mozambique about where the core area's dispensation in terms of which you could file are returning dollars and, therefore, not tax on foreign exchange gains between metical and dollars. Unfortunately, that dispensation expired. For the past 4 years, the team has been working on reinstating that dispensation. And I'm excited to say that they were able to secure that, which meant that all the deferred tax liabilities that I was required to raise, from accounting perspective, needed to be reversed. That amount is about ZAR 61 million at legal entity level. I'll talk a bit more about the quality of earnings so you can appreciate the earnings achieved. Moving on to the next slide. So just a nutshell of -- I've never shared this slide before. I thought I should just highlight the joint ventures because within the joint venture structure, this is where you find our flagship operation in Matola Terminal. As Andrew indicated, we achieved a record volume in 2019, about 5.9 million tonnes. That operation sits at about 7.3 million tonne capacity, which is quite pleasing, and that's what contributed to that 20% growth in revenue. Unfortunately, slightly undermined by the fact that on a trading profit level last year, you would recall, I did mention that we had a once-off receipt of Zimbabwe relating to the long outstanding debt for the fuel concession fee of about ZAR 97 million pretax. If you take that out as a once-off item, it aligns well with our revenue growth. And I'm quite pleased that the TCM revenue achieved is yielding positive margins so far. Move on to the next item, the non-trading item, you would have seen the announcement last week that our project in the Ngqura bulk liquid that we started on about a few years above, 7 years ago, if I'm not mistaken, our partner has -- from last -- about December last year, communicated their intention as OT to pull out of the project. Yes, I think the last reasons that we explained. This management took a view that the continuity of the project is uncertain. And therefore, from accounting perspective, we found it prudent to impair the assets. Those costs relate to the construction work that we've done to date, and so our share of good costs, which is about ZAR 132 million that is included in the ZAR 146 million. Share of associate earnings, we've got Port of Maputo, as you know, which is equity accounted. The earnings of ZAR 71 million, up from ZAR 62 million last year, is a good growth. Again, you'd have seen the announcement of the volume growth, which grew from 19.6 million tonnes last year to 21 million tonnes this year. So it's a good story. And you know that's on the backdrop of the project direct at the -- doing on the path and the increase in the chrome engine facility. Next. So what does this mean in terms of the headline earnings growth that we announced in our trading statement? The main contributor, which is our flagship operations in Maputo in MPDC, as well as our terminal operations have contributed massively to Grindrod's headline earnings, growth of 9%. I did mention a bit about quality of earnings. So if you look at that ZAR 140 million last year to ZAR 308 million, and it accounts the impact of the deferred tax credit of about ZAR 51 million, it still remained with a healthy growth. So I guess if I remove that number and you compare it to ZAR 480 million, you are more or less the same as last year. But if you look at the group number, ZAR 179 million, you will recall that at interim, we -- when we restructured our group and splitting out bank and the private equity book and property portfolio, we've had to put that under group, and that came in with the 2018 restatement, which had some uplift on the valuations. We did not see those valuations coming through strongly this year. That's why that ZAR 179 million to ZAR 140 million is such an anomaly in terms of development, together with the interest movement of about ZAR 83 million. So if you take that out, you would have had to realize the ZAR 480 million. Our integration of the Seafreight business, together with the land site or Intermodal operation and also increase the productivity in South Africa, has seen that logistics segment growing markedly from ZAR 40 million to ZAR 174 million headline earnings. We are aware of the economic conditions in South Africa and what you've seen elsewhere in other banks, and I'm sure David will touch a bit on that. There was a specific strain on the lending side and specific assets, financial assets that we had to apply our expected credit loss model, which meant we had to provide for the specific financial assets to the tune of about ZAR 77 million, and that's why those earnings dropped from ZAR 111 million last year to ZAR 83 million this year. Just a bit on discontinued operation, nothing really materially moved from interim. You'll recall that when we took a decision to dispose off those assets last year in Marine Fuel business and Agri, we stopped accounting for the earnings since May. You will see that at the bottom, share of associate earnings of ZAR 22 million is a reflection of only earnings to May, and that compares to ZAR 160 million last year. Just to remind you, those operations continued to do well, particularly on the Agri. And there's some restructuring work that's been done on the fuel -- on the Marine Fuel business to reposition it following the issues that they've had. Another big number that you see there is the non-trading item of ZAR 730 million. You will recall at interim that we did touch and explain at length the impairment items that we had to take on board. At year-end, unfortunately, fast forward to October, we managed to dispose off our investment in NWK for a proceed of ZAR 202 million. At year-end, we've had to reassess our carrying value for Senwes in terms of IFRS 5. We used the reference price in the ZAR X stock exchange, which stated about ZAR 11.97 a share. So that's why we had to take an additional ZAR 58 million. So there was an additional ZAR 58 million fair value adjustment on that ZAR 730 million. Just for information, I looked at the price yesterday, sitting at ZAR 13, so that number can move up and down. Next. Looking at the balance sheet, this is a sort of a condensed balance sheet, and these are specific questions. If you look at the booklet, you'll see there's more detailed lines, and you'll see some new interesting lines in there following our assessment of some of our investments in terms of how we treat them. So I'm not going to dwell on that. So what I wanted to touch on is the key items. Our PPE base, property, plant and equipment, increased on the back of infrastructure upgrades, as we highlighted earlier, and some handling equipment that we had to bring on board. That investment in associates and joint venture line, that movement is really due to the reclassification into noncurrent assets held for sale. So if you look at that ZAR 3.7 billion dropping to ZAR 2.4 billion, we've got a corresponding increase further down in the noncurrent assets held for sale from ZAR 298 million last year to ZAR 986 million this year. The other item that is immaterial is the liquid assets movement, which is the shift by -- done by the Bank Between the liquid assets and in cash for their operational rigs. Next? Sorry, just put back on it. So it's quite pleasing if you look at the bottom, advances -- no, sorry. Sorry. Next one. The holders' equity reduction from ZAR 9.5 billion to ZAR 8.7 billion is on the back of the impairments that we took as well as the fair value adjustments. We've had to raise a little bit of debt in our facility, and that's also partly contributing to our interest expense. But this year, we're going to fix that in our balance sheet. It's quite pleasing that we recorded some deposit inflows despite the current challenging economic environment. At the bottom, our debt remains manageable. I do acknowledge that there's a little bit of spike in the short term, which we're hoping -- in fact, we're driving hard to revert back to net debt to equity, excluding bank, at below 17 or at least to match last year's 17 -- 0.17. But with bank, that is 0. I don't like to use bank cash a lot because it's restricted from growth perspective. I'm quite pleased that we continue to generate cash consistently, above ZAR 1 billion, and that's quite pleasing for us. And that's what allowed us to continue to support our dividend. I'll touch a bit on that slide. The next interesting item is the net deposit advances. If you recall, in 2018, we used to get a big chunk of cash at the end of the year, which is sitting in our bank account through SASSA, which we are running. We exited SASSA last year, which meant those deposits disappeared, and that's why we had that movement of ZAR 6 billion due to SASSA exit. Thank you. I just thought I should share the thinking behind what we're trying to achieve as part of the financial strategy for -- or finance strategy for Grindrod. On the left, we've got the ability to generate cash, which I've highlighted, and I'm hoping that it will continue going forward. We've got the existing cash and facilities. We've got our disposals of noncore, and we're challenging our executives to exit those businesses, and we're challenging ourselves to make sure that we exit those businesses. And we have a relatively flexible balance sheet, and we're working on that project to just test how flexible this balance sheet is given our complexity of the structure. What that means is that if we execute these things very well, we potentially are going to be cash flush. Without -- if we've got some projects that have got compelling growth potential, it's best probably to deploy the cash in those projects. If those -- if the implementation of those projects is long-dated, certainly, we're taking a deliberate decision to continue sustaining the dividend, but in addition to that, to embark on a buyback program. Andrew will talk about it later, hopefully. We will kick off that with the program using the NWK proceeds that we received last year. We are very mindful of the various disposals activity that we currently have in place, and our ability to do that would be guided by the progress in those disposal activities. Thank you.

So what I'd like to do now is just take you through the operational highlights of each of the 4 freight businesses, and David will take you through the bank before we wrap up. If we look at the Ports business, and a lot of these numbers you will have seen, very good progress on increasing the volumes handled through that Port. And of course, we're not done yet. A number of our CapEx items should be coming to an end mid-June. And then hopefully, we'll see more volumes going through those as we look to generate earnings off that CapEx spend. In addition, and as you see on the right-hand side, we're going into a refresh of the master plan. We have operated under a master plan for many, many years. The objective of that master plan, as I said, very clear goals about what we want to achieve in the Ports and what other associated logistics providers need to do in conjunction with the Port to make it operate at full capacity. Part of that also is to making sure that your people are well trained, a lot of time spent on training of the people. You see we referenced the simulators. We train people from all over the Mozambican ports and outside of Mozambique at those simulators. We also embarked on a Porto+ project, which is the project to include disabled people into the port. So a lot of the soft issues which are actually the hard issues that make the equipment all work. So good progress in that Port. As I said, a lot of work on the master plan, setting work targets for 20, 25 years out from here. And that's in place at the moment and will probably be delivered at the port conference in Maputo halfway through the year. As I said earlier, the slab 7, which is another chrome slab, and the key slab is being rehabilitated, and those will all be ready in June. So good activity in the Ports and a very clear focus on what they need to achieve next year. If I move to the Terminals. And a lot of you have asked me the question year-after-year, and we'll get to that slide on the capacity, is, when are we going to be full? So you will see from some of the achieved targets certainly in the last quarter, the guys at the Terminals are getting it right now. So the habit now has to be embedded, and they run on mantras. They have 600, 600, 1,000, 15, 15, and those all relate to how many wagons they have to tip in a day, how much coal they have to load in a day, et cetera, et cetera. So good progress by -- certainly, in Matola Terminal, which is a lot of magnetite. And you can see there, we road hauled magnetite to the terminal for the first time. Car terminal, even off its low base, has done quite well. And that terminal, we are looking, as you see on the right-hand side, we are looking to use, to put cargo for the oil and gas project into the car terminal because it's a classic lay-down area that these people need. So good hard work by the Terminals team. They understand that what they've done before, they have to do again, so there are big expectations of them continuing that volume in Maputo. Richards Bay, a little bit more difficult because South Africa needs its coal. So you would know that RBCT and Richards Bay, the coal part of our Richards Bay operations are down, and I'll show you that on the slide coming. So we're looking -- and that's where the diversification comes through. If we look at this table, which you all know well, H2 2019, Matola Terminal at 3.5 billion is what we want to repeat. So if we're repeating that every 6 months, we'll get to close to the 7 billion that we're talking about. And in fact, I think the 7 billion is light. So the team is working hard on that. If you go to the 2019 total column and you look at the Richards Bay and Maputo Terminal, those are mostly coal. There are other products in there, but it's mostly coal, and you can see that that's down. And that's as a result of South Africa not having enough coal and the local operators wanting to sell into South Africa. I've talked about diversification a few times. There's the diversification slide. It shows that our main product is chrome and then magnetite. There are other projects. Now this is just the terminal operation. Remember, in the logistics side, we are also dealing with lots of minerals. The graphite through Nacala is not on the schedule, for example. And then a lot of focus on coal. You've seen all the miners talking coal, coal, coal. I thought it was important that you knew the extent of our EBITDA from coal. And you see there 7% of our management EBITDA, so that's including the Matola Terminal. And that's consistent. It's been that sort of number for a number of years. If we move now to logistics, and what I referred to as the container business, which includes the Seafreight, Intermodal, clearing and forwarding, and ships agency business. A significant amount of work with the shipping lines and with Portnet to ensure that any of the congestion, we alleviate. So huge amount of TEU moved, as you see there, 500,000. You see our footprint in the container depot is now going over 600,000 squares, which is a significant size. We added -- we're [ moving ] 4 ships on our coast for many, many years. We've added another ships to coast, again, to make sure that we alleviate congestion and make sure the products are getting out of the country. We had a wonderful grape season. We're all set for the citrus season. So making sure the planning together with the shipping lines and Transnet works efficiently, and that's inbound and outbound containers. I think for us, the very important part of this business is to make sure that we have really good relationship with the shipping lines. Maersk got about 40% of the containers into the country. We have a good relationship with them, but also to be able to service the CMAs, MSCs and Maersk of the world. And of course, we're looking to secure additional storage because we think we're going to need it in the years ahead as we carry on developing this business. A lot of discussion about Northern Mozambique and our strategy. Operationally, what we've physically done on the ground, we've got that site at Nacala. We're moving graphite. There's 50 trucks now running graphite to the port. We are running trucks into Malawi, to Blantyre. We've lifted cargo out of Chipata in Zambia, so that can still come all the way down that corridor. Quite a lot of the people in Malawi are running all their product to Beira. And of course, with the devastating storms that they had, they're looking for a separate corridor. So lots of work on that Nacala corridor into the hinterland. Also up into Northern Mozambique with a lot of Agri projects, whether it's grain or nuts, there were bananas there for many years, those sorts of things we've got to help lift again. And then, of course, we were running trucks into the Palma region, and that was before the floods took out the bridges. So they've rebuilt a road, which is not strong enough to carry heavy equipment. So there is a serviceable road up there, but it's not equipment road. So at the moment, we have a barge on secondment to Total. They're using a barge to get the water, food, fuel into that -- their area where they're building with the projects on the go. And we've got 2 more ships arriving in March to help with that whole project. So for us, a very important area. We've got our management structure up there, now people in place, some of our Bs people are there. Once we're in the B team, you got to send the A team to get it right. So we hope to be delivering a lot of services for the people that are busy building. The WBHOs are building the housing and the guys that are building on the sea side. On the North-South Corridor, within the loco leasing business, we were at 80-plus percent deployment, which is a good number. We've obviously now brought that 24 locos back from Sierra Leone. Those are in repair facilities at the moment. We want to give them a big service before we send them North, the big truckers to link with wagons and get trains locked down in a corridor. We're working very hard with our partners to try and pull all these bits and pieces together and, obviously, the governments. Because without all the governments aligned, that corridor doesn't work properly. So a lot of work pulling the -- understanding what the miners require. So in Northern Zambia and the DRC, all the copper that's up there, the inbound cargo on the sulfide to make sure that we got that dual traffic and then putting it onto the rail. David, do you want to talk to the bank?

Thanks. Good morning, everybody, and nice to see some old faces again. I've noticed Andrew, this time, didn't say that the banking only says we're very boring, and we just carry on seeing what you're doing. Unfortunately, 2019 was not a boring year. But I'd still like to keep things very simple, and I'm going to hopefully do that again today. I'm not going to run through point by point there. You can read it and it's self-explanatory, I think. But I've been saying for a while now, and unfortunately, it's now proven to be true, that we anticipated that we were going to see credit problems in the economy. Well, that has manifested. The other thing I said a few years ago, I said I'd like to see the bank being a much smaller part of the income statement contribution for the group. I was hoping that it should be because the other areas have grown significantly ahead of us, that there'd be -- but it's a combination of both. Unfortunately, we've obviously shrunk this year and the others have grown. But having said that, our story is a simple one. We've had to weather the economy, and that has manifested itself in some very specific one-off impairments that we don't see repeating itself. And obviously, the loss of the SASSA income, which was fully felt this year, but again, we'd anticipated that. So we've got to this data. Our income statement was obviously negatively impacted. And that's, I think, set a base for us that I certainly wouldn't see us repeating going forward. But at the very least, it's profit. And for us, that's a critical component. Having said that, our balance sheet is now -- well, it's still exceptionally strong. We've got, as you've seen, growth in deposits, huge amount of liquidity. [ Xolani ] he'd lambaste me again for how lazy my balance sheet is. We're delighted that's been the case. And we've been deliberately cautious in our advances and growth in lending. We've had some growth, but not nothing like we've seen in the past. So we think we are very, very well positioned, and we're very adequately capitalized. So notwithstanding, and I'm very pleased that Xolani can deal with IFRS and the complicated stuff, all that. To be quite honest, for us, it's not, what is the actual number? You can IFRS everything with 9, 10, 15, 16. I'd like to see what is our actual profit and what cash are we generating. And there, we are in a good position. So as I say, very conservative in terms of our book growth. Huge amount of surplus liquidity and adequately capitalized. So that means we're in a position now where we can take advantage of gross debt and revision back to previous profit levels. And I was going to see how many of you would remember the movie Jaws. There are a few of you who would have remembered one of the lines in there. But for us, to get back to that growth, it will happen as a matter, of course, just by, effectively, by trading water in where we are. But to get some growth off that, we will look to do that, but only when it's safe or when we feel it's safe to get back in the water, and I don't think that's right now. So thank you.

Thanks, David. If I then just touch on what we've hit at noncore. I know a number of you have asked me questions over the last 6 months, how we're doing. You remember at August, we talked about the private equity book being mature and looking to dispose off that private equity book over a 3-year period. That is in place. Teams of people working on that. Both Senwes and the Marine Fuel business, we are working with those -- the other shareholders to make sure that we land those 2 businesses in the right place. They obviously have done really well in the second half. But certainly, as Xolani pointed out, you can't show that income anymore. They've had -- the farmers have had a good second half, and the cocked Marine Fuel guys had a really good second half and, as you all know, on to lower sulfur fuel now in the first quarter of this year. A really good first quarter for them. So a much easier position for us to go into the market looking for new shareholders to take over from us on the businesses. And of course, that's been the focus for us for the year ahead. So then in conclusion, the growth strategy and in this dynamic world in which we live, I mean this is the map of Africa. This is our African map. This is where Grindrod operates. The freight services business is creating an open -- and working with other people to open trade corridors. The bank is hoping to facilitate the economy in South Africa to grow. We work with the governments in all those areas. And indeed, on a daily basis, we work with the SOEs. They are our partners in all these operations. We are very positive on the outlook for the minerals and the gas markets that we operate in. We're obviously watching COVID-19 very carefully. Sadly, that came up on this world as we were coming out of the trade wars and we're expecting a little bit more growth. But this is our Africa. This is where we operate. And it's up to our 4 divisions to deliver on the sustainability of our region. And of course, the bank also to lift for business in Southern Africa. We are excited as a management team to be executing on this, and we hope that, that will bring the value that shareholders seriously need to recover in our share price. Thank you for listening to us. And the 4 of us will take questions or if there's anyone in the audience that needs to speak to a specific question, I'm happy to hand it over to them. And I do know that we've got some people on the phone lines. So if there's any questions, Steve, can really take them.?

Any questions on the phone? Nothing on the phone? There's one here on the front.

My name is [ Klem Kumantz ], I'm a private analyst. Who would you say is your main competition in your Northern Corridor and your main Ports and Terminals activities?

So Beira is very well run by a Dutch competitor of ours called Cornelder, a very well-run port. We do a lot of comparisons with them, specifically on crane moves. You would understand why we do that because there's been quite a lot of pressure on transit on the crane moves. If you go further up into Africa, we see a lot of Bollore. They're in Africa and mainly the front side of Africa. Imperial, as you've seen, they've been asked quite recently about their gateway into Africa. Certainly, on the trucking side, they're quite big. And then a lot of those Zimbabweans have their own companies that run trucks. So I mean if you're on the Johannesburg-Durban highway, you'll see the trucks running copper. Every kilometer, you have another truck. So there's a lot of the trucks from Zimbabwean operators and DRC and Zambia operators that run down. I hope that answers you.

Keep on popping off the wall, guys. If we jump back to the cash flow statement, you'll see cash flow from investing is obviously a positive. I think it was positive 6, but that includes the realizations of some of the noncore investments and the like. Can you unpack that sustained low maintenance CapEx and an expansionary CapEx? And then obviously, just understanding go down on cash to keep operations running and to grow operations.

The level of sustainable or what I call it sustained business CapEx is about ZAR 300 million to push it to be ZAR 400 million. That's what you would need to sustain our current operations. And on the Terminals side, we're doing some activities on the Richards Bay side and also on the Mozambique side. We had extensive CapEx over the past few years where we did key offset projects. So we don't expect that number to change significantly. So with that in mind, and if I'm generating cash of ZAR 1 billion, I can play -- not play, but I've got ZAR 700 million to sort of maneuver. And that's why we are confident that the dividend level that we introduced is sustainable. We didn't go aggressive when we introduced it. And therefore, we are in a position to say we're going to embark on a meaningful buyback program.

Is that a net figure? Or did you really -- I couldn't properly hear your explanation.

If we look at the expansion projects, we've spent money in Palma, procuring land and really are busy building a facility there. We've spent money in Nacala on a warehouse facility there. The other CapEx is mainly leases with trucks and with the ships that we bought on -- so not a big amount of capital spend. The spend on the North-South Corridor, we have done already. That's the 24 locomotives that we bought back from Sierra Leone. So the CapEx outlook is quite light, and I think, I guess, that that's a little bit of an answer to your question. What we do expect is if we are successful in some of the disposals, we will have the cash back, the ZAR 200 million that we've got on NWK, to carry on with the buyback program.

Just to your other question. So the last chunk of CapEx last year, so this is what makes the side of construction as a little bit complicated. So the TCM is where we had expenditure. And unfortunately, this is on a legal basis, so you won't see the CapEx coming through from TCM. And also on the MPD side, the unexpected visitors in Mozambique, we spent about $63 million, if I'm not mistaken, over the 3-year period, rehabilitating that and expanding on the chrome-handling facility. And there is a sustained -- sustainable, for instance, stretch on that CapEx and policy. Unfortunately, it doesn't come through well on the legal cash flow statement. But if you go to the joint venture cash flow statement, you'll be able to pick that up.

Sorry to be hogging. Please, can we look at your preference share situation, if we could start with the income statement? I'm sorry, we don't have box sets. Is that intentional?

No, the -- what we did is we released the results to -- on SENS through the JSE, and they have then released it on -- I think they did about quarter past 8.

Could you start with the income statement? I thought I saw preference dividend as a payment there.

Yes, there is. That's perhaps the ZAR 66 million.

Yes.

If we have paid, perf.

That's an expense?

Yes. It is.

And why then do I see preference dividends on the asset side of your balance sheet or preference shares? And this, I can't read.

On the balance sheet? Okay, I'll explain it. That's the financial position?

There you are.

So okay, this is what I avoided, the IFRS conversation. Within the bank structure, the vehicle or special purpose vehicle that we are using, which is above both in terms of tax and legal. So in terms of that, the investors are allowed to invest in the structure. They call it participatory contract. And then the trust will then go out and source the pref share investments on behalf of the investment.

Is that your B-BBEE financing?

No.

No, no, no.

In fact, completely different.

The asset management function.

Sorry?

Asset management function.

Asset management function.

So if we -- if you look at that preference share, on the next slide, there is a participatory contribution. Those 2 are linked. So you get contribute...

For those participatory contribution preference shares?

Yes.

Yes.

Interesting terminology.

That's what they described there. So it's a trust that has participants that put money in and then base it into pref shares. So you see that asset on the one side and the contribution on the other side.

By the way, we had to do that in terms of IFRS 10. We had to consolidate it.

Any other questions?

[indiscernible]. Really very impressive, well done on the efficient operations you have at what you call the North-South corridor. And clearly, they're selling the right equipment in the right place and the right management, extracting the right value from that management. Would you care to make a comment, if it isn't too slanderous, on why Transnet can't even get the right-sized rolling stock? But seriously, that holds back the whole region and thus hold back your ambitious North-South transport operations.

Yes. I think it's important for us to explain that -- I'm just going to get to our map. In every single country, we engage with government, and we're doing presentations to the Minister of Trade in Mozambique -- new Minister of Trade in Mozambique and the Minister of Finance in the coming weeks. We spend a lot of time with DPE and finance in South Africa. We work every single day with Transnet, freight rail, port operations, we work every single day with their equivalent in Mozambique. We have partners in Zimbabwe rail. We have partners in Zambia rail. So there are numerous -- across our whole business, there are numerous PPPs, as we refer to them collectively. So we engage either at an equity level or on a -- into Richards Bay, the operation at Richards Bay works with freight rail and the ports. We have one billing account, so the 3 of us work together. So we have a lot of that. What we have seen is that they are very encouraged to use us because they enjoy our adaptability and our flexibility, certainly, and that's what we're seeing in the ports at the moment. Where they get congested in Kruger or Durban, we are able to go with their consent alongside a berth to load containers and alleviate the stress in the ports. So very important for us to have a really good relationship with -- at all the government level as well as all the SOEs. And people ask me about Eskom and the disaster that Eskom has -- Eskom is a dream compared to the other countries. We have 13-hour blackouts in Zimbabwe. We have up to 18 hours in Zambia. We've lived with blackouts in Mozambique for years. So we always make a plan, and we always get it in those countries. The miners have operated -- I mean everything that's happening in Palma now, there's no power there. So it's all -- and the miners have always operated like that. They go to whether it's Northern Australia or into Africa, and they operate a full mine site, and they use a Bollore, Caterpillar equipment or whoever it is you help with the generation of power. So yes, it would be a very different place if all of the power facilities were running full at speed and all the rail and all the ports are full speed, but that's not where we are. And we luckily have got that relationship with all of them where we can work together quite successfully.

That's -- it's surely an achievement. Well done.

Thanks. And something that I know, and Alan used to stand here. We've always worked with Transnet for years and years and years, so we had a really good relationship with them. The only way we can do Maputo is because of Transnet. All that product going out, am I right, Vishal? All that product going out of Maputo is on a Transnet wagon, every single tonne, except the road, all right? So when I talk about master plan for Maputo, it's not just the port, it's the coal corridor. And that's why we're talking more and more about corridors because it's not just the Nacala port. It's that whole corridor, and Transnet is integral certainly in the Maputo operation. So yes, there's a new CEO at Transnet, which has finally arrived. We've got a person permanently on the phone, and we look forward to working with her team as she goes forward. Good question? Any more questions?

COVID-19?

Coronavirus is a big issue for us. We see that about -- the ships into the 2 main ports in China are about 19% off from last year. We've had 2 vessels blanked out of Maputo. That is a problem for us. We're watching it obviously closely. I see that the U.S. are even talking about more cuts, so they're obviously taking it pretty seriously as well. A lot of people -- we are supposed to have 2 people in Italy this week. They aren't flying. Our shipping, our ex -- our shipping colleagues who are now a sister company to us, they're finding it quite difficult because they're in Singapore. You all know what happened to the bulk index. You can charter a CAPE now for $2,500 a day because they're not being used. If you take 20% out of the market, you don't want to be owning CAPEs at the moment. So yes, hopefully, we get over this. Hopefully, we find the cure and we get over this back quickly. Thank you. [ Christina ]?

Could you -- I mean on the COVID-19, could you maybe just remind us your sort of geographical exposure of the commodities that you ship out of your ports? Which regions?

So chrome and magnetite, all going to China. And that's where we've had 2 ships. Well, they call it blankies, where 2 ships haven't loaded. But we are still doing more volume than we've done in the past. The little coal that we're doing at the moment goes through the Indian power station. The containers coming from the East with the likes of Maersk are still flowing. And we are returning -- in fact, some of the empties, we are actually fixing for Maersk here in South Africa, that normally go back to China and get fixed there. So there is some ancillary work that we're doing here. And then, obviously, there's a big load that runs from South Africa into Europe. It's still going full speed ahead. Okay. Thank you very much for listening to us. We are very grateful we had a good year last year, and we are focused on making sure that we carry on in the current mode. Vishal and his team is at the back there. They are the ones that broke lots of records, and we are looking to break more again this year. Thanks very much for your time and for attending.