Grindrod Limited (GND) Earnings Call Transcript & Summary

Good morning, everybody. Good to see you today. I'm seeing some familiar faces from our investors. And quite interesting is whispering to my CFO here at -- I'm also seeing some new faces. I'm hoping that our share register is growing up nicely. And the liquidity we're looking for is coming up nicely. It's good to see you here today, and we appreciate all of you joining us to come and listen to us presenting our story for 2022. I'd like to acknowledge the others that are currently coming through our live stream as well as the audio platform. I was hoping the Chairperson Cheryl Carolus with [ Janice ] today. She seems to have had some hiccups on the way. I'd also like to acknowledge 2 Board members, Walter Grindrod and Zimkhitha Zatu Moloi, welcome. Thank you. I'd also like to have a special welcome to our Logistics colleagues. [Indiscernible] are our new business partners. We concluded a transaction early this year. Fathima will share a bit more on that later. Today, we've got a short program, clearly short. I'm sure you'll be excited. The first, we'll play a corporate video. It's a way of us to get through the presentation. It gives you the story, and it also lays out the context and the scene for 2022. This will then be followed by our presentation between myself and Fathima. We will then take the questions from the floor here as well as from the audio platforms. We'll also respond to the written questions. We've got an iPad here, use of technology, which allows the written questions to come through quickly, and then we will respond to those questions. You've got the option to forward questions to Fathima as outlined in the presentation, there is an e-mail address for her. We will be able to then respond to those questions accordingly, either in person or through Teams or phone, whichever you prefer. To meet some detailed questions that can come through from the floor for which we are not ready, rest assured that we will respond to those questions after we've done some homework and engage you accordingly. So as a start, I will play the video. Please enjoy it. I hope you'll find it as exciting as... [Presentation]

I hope that lays the foundation of what we're going to be presenting today and the story we're going to be telling our shareholders and our stakeholders at large. Safety is paramount to our operations, and it's a priority #1 in all that we do. We target zero fatality and zero LTI. I'm quite pleased that our operations have been running fatality-free since 2020. We remain below LTIFR of 0.5. We improved from last year's 0.41 to 0.34 this year. All these targets were achieved when the business activities across the board were on the rise. Our people did not disappoint yet again. Moving on to the highlights. In terms of the macroeconomic operating environment, we all see the dynamic economic environment in which we operate. Looking at the global macro factors in which we achieved our results, volatile geopolitics was at play, and we expect this phenomenon to continue. Winter in Europe was not as bad as was expected. That eased off the coal prices from the highs of $400 a tonne to a range of between $140 to $150 a tonne, which we see today. We also witnessed a fall in the shipping rates. Yes, this is beneficial to some of our customers in terms of the logistics value chain costs. China maintained its strict zero COVID-19 regime last year, which was lifted towards the end of the year. If you move closer to home, there seems to be some encouraging developments in the insurgency risk in the northern Mozambique. But we remain cautiously optimistic on the return of the LNG project. Some of you will know in 2021, when that project was really picking up nicely. We're at the forefront in terms of the marine solutions we are providing. You will recall that at one 1 stage, we had 8 [ LTCs ], which are the landing crafts for project cargo handling, running up and down the East Coast. We're hoping for that to return. Higher increasing debt levels in countries in which we operate are a bit of a concern. You saw this year the Mozambican Central Bank introducing or in fact, increasing the reserving ratio that it requires from the banks to keep with it. Now we know that, that creates some liquidity crunches and inevitably may result in funding costs going up. So with our project pipeline currently in play, we need to monitor that very carefully. If we come back at home, the challenges from load shedding, the [ crippling ] strike last year in our Logistics value chain, the general challenges in our various corridors were very dominant. We also went through the devastating floods last year. Some of you will recall, we showed the video of our containers floating nicely or not so nicely. As we speak, we are going through Cyclone Freddy. Cyclone Freddy seems to be a little bit confused. He was in country, seems to be going back. We hope it doesn't pick momentum and come back and hit us again. But with our resilient team, we are able to navigate the challenges. We've had some few incidents, where the heavy rains have washed away some of the lines, but we immediately repaired those lines. Unfortunately, they're being washed away as we speak, and we will come back and fix them and run the show. The customers expects us of that. If you look at our commodities in terms of the market performance, coal outperformed, no doubt, iron ore underperformed, but it rebounded nicely towards back end of last year, and it remains around $120 a tonne. And it seems to stabilize along on that range of $120 to $130 a tonne. Chrome fed very well, but ferro was somewhat marginally down. Manganese was volatile. So that's a picture under which we actually delivered the results that I'm now talking to in the highlights slide. I'm quite pleased that we achieved record volumes across our Ports and Terminals, which is underpinned by strong demand. Our teams responded well to capture some of that point demand. We've seen some businesses where this demand has not really meant an increase in the bottom line. We continue to make a positive social impact through our business, it is embedded in our [ papers ]. We shared the success with 7 mining companies, who are emerging. We deliberately allocated the export volume footprint in our terminals for a total of about 3.2 million tonnes throughput without displaying our existing customers. You'd have picked it up in the video, where the list of those customers who benefited from the allocation was shown. For the shareholders, I'm sure you will be pleased that headline earnings grew 37% from our core businesses. We are returning ZAR 600 million to you in dividends in 2022. Of course, that number includes a special Christmas gift in December, following the conclusion of the bank disposal. If you look at our Ports and Terminals, the Port benefited from its upgraded infrastructure. You'll recall early last year that we commissioned 6 beds. We also commissioned the slabs, slab 7, and we also commissioned that we were going discharging facility inside the Port. We upgraded our road infrastructure. And based on that, we have been able to capitalize on the utilization of that infrastructure. Our chrome customers are witnessed to the ability of their vehicle allocation for the slabs, and they continue to benefit on the efficiencies for that -- from that infrastructure. But most important development that happened last year is on the border, where on the Mozambican side, we opened up the border as well as in South Africa on a 24-hour basis. Now that allows for a seamless flow of cargo through tracking into our facilities. Our Terminals outside the Port, the performance was underpinned by strong coal demand and continued magnetite export solution that we continue to provide to our key customers. Those customers remain loyal to our facilities and to the solutions that we provide. Matola was consistent in its volume delivery. It achieved 8.1 million tonnes last year. You will recall that in 2022 -- sorry, in 2021, it reported about 8.3 million tonnes. That is despite about 42 days of lost productivity because of incident, which was very unfortunate, on the key side and also the impact of frequent derailments as well as the head-on collision that we had towards the back end of last year. So you can imagine how that 8.1 million tonnes would have been had we been able to continue to operate without that impact. I indicated at interim that we grew our capacity in Matola Terminal from below 1 million tonnes to about 4.5 million tonnes. We concluded that expansion at the end of quarter 1 in 2022. As soon as we completed that expansion, we delivered 3.2 million tonnes against it, which is 71% utilization. We're hoping to continue that utilization this year. Our route to market via theGoba line, which goes through Eswatini and that was introduced by our colleagues from Grindrod Logistics Africa, is an alternative to the main line into -- via Komati into Maputo, is delivering very well. I'm quite pleased that in January this year, we achieved a 1 million-tonne mark. I'm also quite excited that we've now signed up the second customer. We are aggressively looking to secure chrome customers so that you can diversify that solution. We believe it's an appropriate solution, given the level of trucking that you currently see on the road. We are relentless in unlocking the Northeast corridor to ensure seamless cargo flow into our facilities. And then to let just graphically show how we've performed since COVID. If you use COVID as a benchmark in terms of where we are today in the Port, we've achieved a compounded annual growth rate of 20% at the Port. We see an increase in our market share the Port from the chrome cargo customers, and we continue to see an increased demand for our unique solution that we continue to provide them. From our terminals in Durban, in Richards Bay, in Namibia, Maputo and Matola, we increased our volume on a compounded growth rate basis by 30%. That is quite pleasing, and it shows a solid growth. You can see on the chart that the second half of the year typically is better. That's a reflection of the weather impact in the first half of the year and some closure on the rail lines for maintenance as well as Chinese New Year that dampens the demand in the first half of the year. If you look at our Logistics segment, we have concluded the joint venture, which we've been talking much about over the past 3 presentations. And that has got a profound impact in terms of our container volume presence in South Africa. Our combined footprint will now grow in excess of 800,000 square meters nationwide. If we add our United Container Depot, that capacity increases to 1 million square meters. It is massive in terms of our container footprint in the country. We will operate 25 sites nationally. That's the beauty of this joint venture, and that's what it means in terms of our business going forward and our place in providing customer solutions, particularly to the shipping lines. Remember, these facilities are not dedicated to a single customer. They are dedicated to all the shipping lines. So the prospect of extending the solutions to Maersk and work jointly outside the country are enhanced. The growth prospects remained positive in our container business. If you look at our Rail business, we moved 5.6 million tonnes on a bespoke solution from the mine to propel port in Sierra Leone. We currently have 11 locomotives deployed in that facility. It's a long-term contract, and we provide a full suite of a Logistics offering to our existing customers over the -- of course, that solution is dependent on the point iron ore prices. But we're quite pleased with the latest development in terms of building a plant that will refine the product and upgrade its quality for an export market into Europe. We established presence in East Africa. I have a gentleman here that is permanently placed there. And the team is making progress to entrench ourselves in that region, and that is in line with our strategy that we presented at our interim results. If we move on to noncore, which is a pain for us. Our private equity portfolio is largely complete, and that is great. We only have one major asset remaining, and we are working tirelessly on that to close it off. Fathima will share the vary -- the [ current ] value of that asset that is currently in our books. The efforts to recover the loans and advances to North Coast property entities are progressing, albeit challenging. Marine Fuels performed well. It grew its earnings by 119% from 2021. That is on the back of the strong prices, which improved their margins. I'd like now to hand over to Fathima to take us through the numbers in terms of what all of this means for you.

Thank you, Xolani, and good morning to everybody from my side and welcome to our results presentation as well this morning. I think, through the video and Xolani's preamble just now, you got to appreciate a bit of what financial year 2022 meant for us as Grindrod, lots of wins and record breaking to celebrate, but also recognition of the fact that we've been able to deliver amidst the many challenges that we've had to overcome as well. Very pleased to present Grindrod's results for 2022. If you look at our income statement, this is presented on a segmental basis, which essentially means that the effects of our joint ventures are accounted for on a line-by-line basis. A big milestone for us this year was the disposal of Grindrod Bank. And because the bank was reported as a separately disclosable segment, also a major business line for Grindrod, the accounting standards require that we represent the 2021 information so that it becomes comparable and understandable for users, certainly as far as continuing businesses is concerned. Our continuing businesses, what falls into this bucket, we've got 2 parts, like Xolani mentioned. We've got our core business, which is Ports and Terminals, Logistics and effectively our group segment. And then we've got the noncore business, which is the Marine Fuels and the private equity. Revenue for this year for our core businesses, up 58% on 2021. This is reflective of the volume growth that we've been able to see as well as the improved tariffs that we've been able to secure from our customers and most importantly, some of the customer solutions that we've been able to deliver as Grindrod this year. Noncore businesses, essentially, that's Marine Fuels, takes up about 70% of the segmental revenue reported. And again, this is the way the oil prices behaved and increased in 2022. Trading profit, up for our core businesses by 32%. A key point to note with respect to the trading profit for our core businesses, we did take an impairment of ZAR 223 million in 2022. This was in view of preference share loans that we had advanced to the Richards Bay empowerment structure several years ago. In January 2023, our partner effectively exited the structure. And with that, these preference shares were settled at a nominal value, which necessitated the impairments that we've had to record. Noncore operations, that is really a function of the fair value losses as well as credit losses and impairments that we've recorded on the private equity book as well as on North Coast properties. If you compare to the previous year, the previous year looks low in the context of the book, but that is because on the property portfolio, we actually recorded fair value gains in view of securities that we registered during the course of 2021. These impairments and losses are what largely drives the elevated effective tax rate that you'll see in our income statement for 2022 because they're essentially nondeductible for tax purposes. Our non-trading items are light this year, which is -- and is really a symptom of property, plant and equipment that we've disposed of during the course of 2022. And you can see that our associate earnings, nicely up at 42%, in view of the records that the Ports has been able to deliver on during the course of the year. Overall, earnings for our continuing businesses at ZAR 776 million. Our discontinued business, which is essentially the bank, reported a loss of ZAR 175 million. And again, this is on the back of the loss that we saw on the disposal of Grindrod Bank of ZAR 292 million. Overall earnings for the group at 601 for financial year 2022, up more than 200% on 2021. And most importantly, our core businesses delivered headline earnings of ZAR 1.1 billion, as Xolani mentioned. If I move on to take more of a deep dive into the segments. Ports and Terminals for this year, revenue more than doubled at ZAR 3.7 billion, with EBITDA margins growing by 98%. This is -- revenue is really a function of the expanded footprint we've been able to secure at the Maputo Port and the volumes of 3.2 million that Xolani mentioned as well. The EBITDA margins are somewhat subdued in view of the coal trading activities, which we embarked on in 2022. Coal trading was really Grindrod's effort to try and participate more in terms of the supply chain under the good market conditions. What this does through the -- what it did through us working with an agent, it allowed for us to have uplift at a net profit and at a headline earnings perspective, albeit diluted our EBITDA margin slightly. If we had to adjust and normalize our EBITDA margins for what we refer to as a value-added service offering, you'd see that we achieved 44% EBITDA margins in our Terminals business. Overall, healthy earnings, headline earnings for Ports and Terminals and return on equity doubled up to 32%. Our Logistics businesses, revenue up by 12% and EBITDA up by 47%. Again, this is largely in view of several factors. The main one being that we've been -- we were able to secure favorable charter rates on the vessels that operate in our Seafreight offering. We were also able, through our Grindrod Logistics Africa business through unlocking the Eswatini corridor, to be able to uplift our revenue and EBITDA margins. And then, of course, in 2022, our margins were somewhat subdued in view of the fact that we still had the carrier businesses operating for a fair share of the year. The disposals happened largely towards the tail end of the year. And those businesses operated at fairly low margins. We also saw the seizure of the Northern Mozambique oil and gas activities in the first half of 2021, where we then had to book several impairments, write-offs and onerous contract losses. So all of these factors really helped with the improvement between FY '21 and FY '22. Again, the headline earnings, more than 100% up on 2021 and a firm, solid 32% return on equity from our Logistics businesses. From a balance sheet perspective, key things to highlight. The disposal of Grindrod Bank largely sees loans and advances as well as the liquid assets and negotiables come off our balance sheet. We also see zero deposit book reflected. If you recall, the bank had listed debt. That listed debt is also off Grindrod's books, which has helped with the interest-bearing borrowings coming off somewhat. The transaction with Maersk, which became effective in January, accounting standards require that we acknowledge all of the assets that go into the structure together with associated liabilities, and we disclosed these as held-for-sale. You'll see that we've disclosed assets and liabilities to a net asset value of ZAR 611 million at year-end, associated with this -- with what will be contributed to the JV. Our other investments have come off by close to ZAR 0.5 billion. Again, this is the private equity book falling from -- with carrying values of close to ZAR 622 million in 2021 and being reflected at ZAR 319 million in 2022. Again, the key underpinning the ZAR 319 million is the asset financing investment, where we're on close to about 35% of those shares, and that's reflected at ZAR 241 million as of December. You'll see that our current liabilities and current assets have bolstered. This is in view of the improved trading in our Terminals business as well as the timing of cash flows between our clearing and forwarding and ships agency business. Also, the Marine Fuels business operates a sizable debtors book as well as credit lines with the various suppliers. From a net debt perspective, we started this financial year being net cash of ZAR 451 million. The ZAR 2.7 billion is essentially us derecognizing or excluding loans and advances, deposits and the liquid assets as well as accounting for the movement in the 10 months that we still own the bank for how the loan book deposit book and the liquid assets behaved. The disposal saw us booking proceeds of ZAR 1.6 billion and also saw us derecognized debt and cash off of our books of ZAR 247 million. We generated ZAR 1.7 billion of cash from operations during the year, which helped us see to our obligations to funders as well as the tax authorities and the distribution to shareholders that Xolani mentioned earlier. Significant investment by Grindrod, in terms of CapEx, in financial year 2022. We invested in property, plant and equipment to the tune of ZAR 578 million, and we also invested in certain of our joint venture businesses to the tune of ZAR 45 million. That's what drives the EUR 623 million you see on the screen. We also had cash returned this year. If you recall, last year with the disposals that we had on carrier as well as the U.K. real estate investment, there were deferred proceeds that needed to be collected. Glad to say that we've managed to collect proceeds, and proceeds coming off of those businesses were at close to 197 million. Our private equity disposals as well as the disposal of our oil tanking joint venture saw proceeds come in of ZAR 201 million. And then we have disposals of property, plant and equipment, which brought in cash of ZAR 124 million. The big underpin for that is our 2 flats in London, which we disposed off during the course of the year. Noncash items, really for our lease liability modifications that we've recorded as well as foreign exchange impacts, gets us to closing net debt of ZAR 182 million for the group, which effectively translates to a 2% net debt-to-EBITDA ratio. At Grindrod, we recognize that on our balance sheet is a sizable amount of cash. To be accurate, it's ZAR 2.6 billion. We look at that cash quite differently. We have the pocket of ZAR 1.1 billion, which is attributable to the proceeds we have on Grindrod Bank. That cash is specifically ring-fenced, invested in various fixed deposit facilities and earmarked for allocation based on what the Board approved in November. Essentially, these are capital projects for our Matola upgrade, which will run the costs over the next 3 years as well as expansion that we'd like to do in the Eastern Cape to extend our manganese footprint. We also recognize that as part of the disposal of Grindrod Bank, we guaranteed and warranted certain loans within the bank to the buyer. And we're ring-fencing cash to be able to make good on those warranties in the event that they materialize. Our total debt for the group effectively fell by ZAR 376 million. ZAR 150 million was towards the preference share debt, which we settled in the first half of this financial year. We also contributed close to about ZAR 229 million to bring down our short-term borrowings, and the lease liabilities fell effectively for repayments or net repayments that we made over the course of the year. That's our total debt position, together with what we deem operational cash, brings us to the net debt position that we measure and look at as management, which is 15%. And that attributes to almost a onetime position to EBITDA. We do acknowledge that there is capacity for debt. And part of that is deliberate. We've got fairly aggressive expansion strategy, which Xolani will talk and give you more insight on shortly, but we're cognizant of the fact to be able to deliver on that strategy. It involves raising debt, and it involves raising debt in fairly tough economic conditions. Also, with the volatility of interest rates as well as what we've seen with the grey listing, it also leaves us in a comfortable place to be able to take on the effects of increases in those rates. Grindrod ended the year with a net asset value of ZAR 12.11 per share. Approximately 80% of this is locked up into our core businesses at ZAR 9.27. And if we adjust our headline earnings per share for the significant once-off items, which in 2021 with the disposal of our shipping shares and in 2022, was the last I just mentioned on the preference shares we impaired, we get to a return on equity of 21%. This is a 61% improvement on the 2021 benchmark. I think what we -- the position we also -- at Grindrod is with the private equity book effectively or the private equity business effectively largely watered down, with the bank disposed, we are in a fairly stable core business, fairly confident around our core businesses, comfortable around cash generation with respect to our core businesses. And it also helps us to be in a position where we can comfortably achieve what's important to us and our capital allocation from a sustainable dividend flow perspective. What we'll move on to now is just some outlook, which Xolani will elaborate on.

Thank you, Fathima. I hope you find those numbers exciting, as I find them. I guess the question now is, where to from here? Are we seeing a repeat of 2022 in 2023? I thought I'd share this slide with you. For me, it just paints the picture in terms of who Grindrod is and what commodities we touch and what solutions we provide to the market. The sum of all these bubbles is 16 million tonnes. That's what we do. And it excludes the other items that are done through other entities. So essentially, that's what we do. And for me, it's an incredible portfolio of commodities that we handle, and it implies customer solutions that we currently have in place in the SADC region. So we touch quite a breadth of customers, and we provide a solution that is necessary in South Africa and beyond the borders. So the main objective is now to deconcentrate this portfolio. You can see that we are currently concentrated on chrome and ferrochrome through our Ports on coal and magnetite and iron ore through our facilities in Maputo and Matola. So that's our forecast, if we want to grow this business. So we need to pay particular attention to certain carbons, graphite. We need to start handling graphite beyond Nacala solution. We are exploring various opportunities, which is currently in our register of opportunities, and the teams are working tirelessly to start making sure that those opportunities are turned into a reality. We need to get to copper flows. By nature, copper flows are high-value items, and they generally typically tend to come with higher margins, and that's where our forecast will be. And it needs to happen beyond our minimal warehousing, which we currently do in Durban and also beyond the locomotives lease that we currently offer to other rail operators that move the same cargo. That's the space we need to start playing in very aggressively. We also need to be in the manganese play. I'm excited that the Board approved last year that we can spend ZAR 150 million to establish our facility in the Eastern Cape, and we're looking to implement that this year. We also want to play aggressively in the agri space as well as in lithium. Now you will notice that the cargoes that I'm talking to, talk a lot to the ESG principle. And what is quite key for us is to make sure that these cargoes are attractive. And I'll touch a little bit in terms of what makes us really find this cargo types attractive to our portfolio of commodities. Of course, the rest of the cargoes that you'd like to focus on, and we'll continue to provide those solutions. So the key takeaway out of this is that while this black bubbles remain or grow, the only dilution that we wanted to have is by growing the other bubbles or other cargo types. So it's -- for me, it's an exciting slide that captures where we want to grow in terms of the solution that we focus on. So where are the real growth opportunities beyond the commodities that I've just outlined? So we run a register of growth opportunities that we've developed over the last 18 months. So when I was asked to look after Freight Services, the first thing that I said to the team, we call them the Grindrod of tomorrow, is, I need to see a portfolio of opportunities that talk to our strategy, which is customer solutions-focused strategy, and I'll touch a bit on what that means in my final slide. And we came up with a pipeline. In doing that, we are very strict in assessing the alignment of any opportunity that we pass you, that come our way or that we actually aggressively are looking for in the market. So those opportunities must have a customer. That's the key starting point. So there's no way we're going to go and build a facility when we don't know who the customer is and hope to get a commercial deal or a customer. So that's the principle that we live by. Otherwise, we'd end up with a white elephant in the room or a white elephant on the key side. We are a part providing a solution to our customer. So there is no point in building up a capacity or chasing an opportunity and there's no clarity of what solution you are providing. And the quality of the solution is its uniqueness and the struggle for a competitor to replicate in the market. And we do that very easily by identifying strategic assets and by ensuring that we've got the right people. So sometimes you can look at the solution and think you can execute it because it looks easy, but it takes a certain caliber of people to actually execute on it. We've got plenty of examples that I can share with you why we've done it and have done it very well. And we're seeing the attractiveness of our solutions from other customers. The solution must be repeatable on the same cargo type elsewhere. If there's no repeatability, then it talks to a lack of sustainability of that solution. It must be fundable outside our balance sheet. If it's not fundable, it doesn't talk to ESG, would have a problem with it. So at a high level, without sharing much in terms of what we do, not give our IP, we are pursuing over 30 opportunities, as it stands. On the scale of probabilities, about 0.5 dozen of those opportunities are high, in terms of probability scale. A dozen is about medium, and the balance is low. Of course, this register is very dynamic because some come in and we check them out if they don't meet our strict criteria. And we are very hopeful that soon we will hit a good one. What you're also seeing is very interesting opportunities that are coming through the PSPs, which sits very well with our capabilities and our ability to make a difference, whether in SADC or in South Africa. Some of those opportunities are well known to yourselves, and we are actively on those in an aggressive way. And for us to ensure that we have a good chances of success, we are partnering with reputable operators, be it rail, with container terminal operators as well as customers. What you do find is that, in fact, you're getting approached by customers, let's say, we believe that Grindrod is in a position to provide this particular solution. Because we are frustrated, we would like to see you going into those. What is it that you would need from us as customers to make sure that you play and you are in the forefront. So that's really gives us some encouragement and the fact that we are -- we must be doing something right. So the opportunities that are currently at an implementation stage, I've shared some of those with you. Matola brownfield project, I've indicated in the past that we'll add between 3 million and 5 million tonnes. Manganese facility in the Eastern Cape, I've just outlined now that we've got an approval to spend ZAR 150 million. On that, we are aware that there is a mega facility that's currently our -- in tender. We pulled out of that tender in a consortium, even though we succeeded on Phase 1 of the tender process. You will recall that the original tender had 3-year commissioning operations, which suited us well. Unfortunately, during the tender process, that 3-year operational requirement was reduced to 6 months. We then waited the 6 months value-add relative to the warranties that come with participation in the consortium, and we made a decision to pull out, not because we did not want to be in the manganese, but it just did not make economic sense, and it would have been a painful process to come to you and say, "We've picked up these warranties in exchange for a 6 months operating period. However, we've been approached by a consortium of customers, who are quite keen to see us providing some level of operational capability, and we're excited that something can come along nicely along those lines. In our container depot development projects in Devon and Johannesburg, we are actively working day in, day out to put a solution between [ Durban ] and Johannesburg, we are actively working day in, day out to put a solution between [ Durban ] and Johannesburg, is much needed. And we're hoping that with [ less ] developments around the net core, we will be able to enhance that even further. We are currently developing an additional container depot facility for our United Container Depot, which we own 100% outside the joint venture with Maersk. I've indicated earlier that we are in East Africa, and I've got a team on the ground, and they keep me excited with the projects. The challenge now is to start seeing the money coming into the bank. On the economic environment that we expect, we sense a volatile economic environment, and I'm sure you share the same sentiment. It's on the back of how inflationary pressures that we're seeing, and we'll probably continue to see increased cost of funding. We're currently in the high interest rate regime. And with our pipeline in terms of funding, it's quite critical for us to continue to monitor that. And for whatever we can in place to make sure that we minimize the impact. High input costs, we're seeing lots of escalation, particularly on the steel price. We -- as I've indicated earlier in Matola project, there's going to be a lot of steel WACC required on our ship loaders and [Indiscernible]. The project team is watching those very carefully and doing whatever they can to make sure that we minimize the impact. Of course, the best way out of this is to deliver the project as quickly as possible to avoid being subjected to price increases over the period. We're also seeing slow economic growth in our geographic footprint, wherever we operate. What is a positive sign is the possible return of LNG. I'm hearing lots of positive news about it, but I choose to remain cautiously optimistic on it. I've sort of indicated my view on it in my earlier slide. So what's the next phase in all of this? We are driven by our purpose to make a positive difference in Africa's trade with the world, touching the lives of the communities in which we operate. We are relentless in delivering on our core business. It is our license to [ pace with ] the growth opportunities and reimagine our business portfolio for the future. We live by our strategic pillars, which guide our focus and the quality of assets we pass you to deliver sustainable solutions to our customers. On that note, I would like to thank you for listening to me and Fathima. And we move in on to the next phase of taking questions. Hopefully, it will be easy questions. As I've indicated earlier, if there are difficult questions, we'll be quick to say please reach out to us next week. Or if they are detailed and you require written responses, we are happy to do so. Again, the e-mail of Fathima is outlined, you can send e-mail. If you need in-person meetings, we are available. To set up those, again, please reach out to Fathima. Probably, next week will be suitable for us. Thank you. Do you have a question on the floor?

It's Rowan [Indiscernible] from [ Chronux ] Research. If you were to characterize your customers, most importantly Terminals, but possibly Logistics, into sticky customers, those who are there because you offer a good service, and then customers who are there because of temporary high commodity prices, especially coal and transit [ woes ], how temporary those are, we'll have to wait and see. But can you just give a bit of an idea of maybe the market shares that you've won in the market and what volumes might be at risk of disappearing if higher prices disappear or if translates somehow manages to fix itself in some way?

That question is a very interesting question. So when we started in Maputo, we've always said that it's an alternative to South African ports. By design, you've got natural [ deep ] ports in South Africa, they're massive. And if South Africa had its own house in order, it probably would be continuing to be seen in that light. The latest development we are seeing, particularly on chrome and ferrochrome, is a long-term view that is being taken by our customers. And we expect some healthy growth, even if South Africa were to fix itself out. And I guess it's one of those things that you see as a customer, do I -- if South Africa fixes itself out, do I retain a single channel for my exports? Or do I make sure that I keep my alternative? So we're seeing Maputo increasingly becoming a de facto solution for customers, particularly chrome. Second part of your question is around sustainability of some of the customers. So I guess the chrome customers cover that. But the second element of it is that, yes, they're are marginal mining companies, particularly on coal, that only thrive when the coal price is up. And you actually see that when you look at the cut-off price, and we've loosely said that as soon as the price falls below $100 a tonne on coal, you will start seeing the high-margin cost mines dropping off because by nature, a solution that will come through Maputo will probably be expensive because it's dollar-based. But I'm putting $100-mark because if there was a way to get a land-based solution that is cost effective relative to track, you could perhaps be a little bit aggressive on that $100 mark. So there would be a potential that if an alternative to trucking solution, we could have a land-based logistics solution that, that $100 mark would drop to $80 mark for coal for those much in our core customers. Of course, the bigger customers that have got stronger balance sheet and of course, a range of coal qualities in their portfolio are able to sustain comfortably that $100 mark. And if you look at our facilities, the beauty of it is that we are currently diversified. So if you then move away from coal to magnetite, magnetite tends to be sticky. And the rationale behind that is the cost of production for magnetite, which are old dumps that are not currently being mined, is relatively low, which makes our facilities in Matola, in particular, sustainable as a solution for those customers. And that's why we remain extremely loyal to them. And in our facilities, they take a prime spot in terms of the loading. So I would say, of course, if the price dropped dramatically on coal, the 16 million tonnes will not be repeatable. But then you still have your base, if I borrow from power, you still have your baseload or base customers that will continue to deliver on a positive EBITDA. Now for us, that's why it's critical to then understand where added growth areas that will then provide the offset. And those growth areas are the 5 cargo types that I've mentioned earlier, which is copper, lithium, graphite, et cetera. And those cargoes come from landlocked countries. And we believe with our integrated solutions and our offering in terms of a combination of rail, truck and access to ports, we've got a unique value proposition to sell to those customers. I hope I have answered your question.

If I may ask one more question. You made good money on your trading activities. Again, can you just maybe explain a bit more on that? Are you going to look to do more of that type of business?

The coal price went up to over $400 a tonne. And if you are a terminal operator, you are restricted to a tonne -- what you call it, the terminal handling charge, which is what it costs you to load into the vessel. And of course, if you participate in the entire value chain, you can dip into multiple spots of that value chain. And it's not a new concept, this trading business. If you recall when iron ore price went beyond $150 a tonne some few years back, we introduced what you call the commodity price participation, which was an innovative idea from our commercial team that said, as a customer, if the base price is x, we're going to give you a very favorable rate. But if it improves, we would then like to participate on a percentage of that increase. We then said, well, we've got another window here to be innovative. And I was approached by one of our team members, who said there is a scope on the cargo that we handle and adding a THC on to actually participate on the upside. What we then did is we set up an office in Mauritius, and we participated and took a position. It was a secured position in a sense that we ticked all the boxes from a risk perspective because we're not traded as per se. And we also locked ourselves in with the mining companies. So I'm not going to expand much in terms of how we structure that before our competitors take it. But essentially, the outcome of that is we ended up with 500,000 tonnes of coal that we would've otherwise handled in the terminal, but we made ZAR 167 million profit out of it. And of course, because we take a principal position, we recognized a revenue of ZAR 1.5 billion.

It's Keith from Integral. Two questions. First one, in terms of state of disaster and potential guaranteeing of power to ports and terminals and railways and the like, how does this affect you? Has anything been communicated that any of your assets or locations fall within that list? Is this good? Is this bad? Because indirectly, you're perhaps potentially competing against some that do have that guaranteed and you may not. So that's the first question. Second one, in terms of the loco refurbs, can we dig into that a little bit more, how many, how far and indications for potential deployments?

Okay. On the power, I'll take that. Again, it's -- when I say our assets are strategic, it does give us some competitive advantage. So of the 16 million tonnes that I referred to, over half of those come from Matola and Maputo, which do not have as much impact in terms of the load shedding as we experience in country. So that gives us a competitive advantage. Of course, that somewhat is mitigated if the state of disaster allows or insulate the port in South Africa, not that I would like the point it's not to be insulated, Don't get me wrong, but then it puts us on par. So that's point one. The second point, if we talk about power in general, is that our Northeast corridor line has got a portion -- quite a sizable portion of that is not electrified, which means that the extent of -- because the load shedding what it does is it allows the criminal elements during load shedding to fiddle with the cables, as we know. Because a portion of our line is not electrified, the extent of the impact on the line is not as profound as the lines that are entirely electrified. Of course, if now they are benefiting from the state of disaster exemption, it means they also have similar advantage as us. But I'd say, it's a good thing that has been done. But one needs to be comfortable that indeed, there will be power to execute on this provision because if there isn't, then it will just be a provision, and the customers will still struggle to get the [ cover ] over the line. So that to me, it would be interesting to see how it plays out. But overall, I see it as a positive because what it then does it means, for instance, the Port of Richards Bay, should then be working nonstop, we've got a facility in Richards Bay, [ compositive ] [ 3.5 ] million tonnes. And hopefully, it will be [ belt ] linked, which will be electricity, and you've got 20 [ plazas ] that run on power. So that will benefit us in Richards Bay, but I do not foresee that to disadvantage us extensively, given that we operate outside the country. And then the status of refurbishment, we had 14 locomotives that were on the workshops. 4 of those are now out of the workshop and 10 remains. I have forced a commitment from management to ensure that those are out of the workshop in the second half of this year.

[Indiscernible] from [Indiscernible]. I've got two questions here regarding the level of ROEs, specifically for the Port and Terminals business. What level are you looking to sustain over the medium to long term of ROEs for this division? And the second question, how effectively are you able to pass on inflation to customers? So yes, that's -- those are the two questions.

The sustainable ROE [ debt ] to target is 15%. Anything less, we would have a problem. So I hope that answers question one. Question two, how easy it is to pass on the cost to customers? It's a function of commercial discussion with our customers. We typically have long-term agreements that outline the increases. Of course, if the inflationary pressures are beyond what was agreed, one would ordinarily have a conversation with customers to the extent to which we can, but we are then bound by those agreements in terms of fulfilling them, going forward. It would be in bad taste to [ remake ] on those agreements. But it seems to have worked well over the years, and we are quite comfortable in terms of how we play the game and how we ensure that we've got the buy-in with the customers. Again, one takes a view that you don't just push customers or costs to customers without trying to work with them to find a solution. Remember, how is it to provide an efficient and cost-effective solution to your customer? So if customer is under paying and we've got the ability to look at alternative solution that can be cost-effective, we will be the first one to raise with that customer. So yes, it's not a simple answer, I accept that, but that's because we want to ensure that we insulate to the extent we can, the passing off cost to the customers and also ensuring that we protect our margins, going forward, and sustainability of our business.

The cash flow statement slide presented by Ms. Ally contains the word legal in its heading. I shudder to think that there may be another cash flow statement which is not legal? What is the significance of the word legal?

So the significance of the word legal is the balance sheet, as you would see presented in our annual financial statements or in our long form. But of course, the balance sheet we presented and talked to on the slides was our segmental balance sheet. The segmental includes the proportionate share of the JVs in the numbers. But for legal net debt because you don't really have direct control and oversight over it, you don't look at segmental cash to measure net debt. Hopefully, that answers your question.

Greg from [ CRC ]. If I recall, you had a slide indicating that your core headline earnings were ZAR 191 million, we sort of backed out your sustainable ROE. Can you just unpack that for us? It wasn't obvious that you could sort of get to that number from your consolidated income statement, that's the first question. The second question, just listening to you today, I'm certainly left with the impression that you're confident that you can graph that number. Is that the right conclusion?

Well, we certainly have plans and pleased to grow that number. But of course, it depends on the challenges that the year ahead will draw for us. So the headline earnings per share, what we did say is that we'd adjusted it for the ones of impairment, Greg, which was the ZAR 223 million. If you exclude that, and effectively, you do your numbers on the number of shares, excluding the treasury shares, you get back to the ZAR 192 million, comfortable to share detailed calculations with you to show you that.

Do we have a question online?

Do we have any questions from any of the callers?

Yes, we do. [Operator Instructions] We have a question from Ryan Seaborne of 36ONE Asset Management.

Just a quick question on the noncore assets. Could you maybe give us some kind of indication of what the expectation of the timing of disposal of each of those assets are and whether you view the current carrying value of those assets to be reflective of potential price realizations in those disposals?

So just to cover the first part, Fathima will cover the second part. The timing of resolving noncore is uncertain. We -- in there, you've got -- on the private equity, you've got a tax finance-related investment. The progress on that, I'm confident -- cautiously confident that we can see it through, hopefully, before the end of this year. The second part, which relates to land, is a challenging one that requires review by management in terms of what is the next step and what options we've got available to us to unlock that value. We'll continue to update the market in terms of where we are. We are pulling specialist resources to work alongside ourselves in terms of working our options we've got available and what strategies we can put in place to unlock that value. At this stage, it's difficult to attach timing. The third one is [ Cockett ]. You would have seen the results on [ Cockett ] growing 119%. The [ Cockett ] has got a carrying bill of ZAR 0.6 billion. And it's a trading business. Any execution of any sort outside the disposal would require a careful consideration. And that's what we're currently running through to make sure whatever decision we land on, we are quite comfortable that at minimum to realize what we've got on the balance sheet. Again, putting timelines on that, given that it's a joint venture with another party to it, would be difficult.

I think from a, let's call it, recoverability perspective, on the first question on the private equity book, like we said, the major underpinning on that carrying value of ZAR 319 million is the asset financing business reflected in our books at ZAR 241 million. Currently, we do have -- we have preemptives on the table with respect to these private equity investments. We do have an offer on the table at about 98% of the value. We've recorded that investment at year-end. Of course, there are conditions associated with it, the big one being the capability of the offer or to effectively raise the funds because we're not in a position to go on a deferred payment regime. We'd like to be paid upfront for the investment. I think, from a Marine Fuels perspective, that's recorded in our books at ZAR 614 million at the end of December 2022. I think Xolani's context with respect to timing makes it difficult to unlock how much we would effectively be able to extract. But what I can say is that embedded in that ZAR 614 million are no intangible assets, goodwill and the like. It is purely related to, let's call it, working capital on the balance sheet of the joint venture. So on the proviso that debtors are collected, the business is a going concern. Creditors are paid. We should be able to extract the value. Of course, that's a significant underpin to that response.

And maybe just to give you more context on the [ Cockett ] side, you recall that the bank took a while to actually get to where we got to. And we were very patient on it. And that patience has paid off. I would like to lean on a similar strategy of seeing if the business functions, does not require shareholder contribution and the risk is mitigated accordingly is whilst it's noncore, let's make sure that we are patient enough to extract what is rightfully belonging to shareholders, as currently recorded in the balance sheet.

And just maybe last, are you preparing value of the land or you are getting to that value that you have reflected?

So the land is held at ZAR 1.1 billion. And it's a mix of a fair value loan, which sits at ZAR 935 million and then amortized cost that make -- amortized cost loans that make up the difference. But essentially, the security are 2 main properties that underpin both the fair value and the amortized cost loans.

We have no further questions from the conference call.

Now we will go to the ones that came through online. Sherry Ramlan from Risk Insights asked the question. Risk Insights has read Grindrod in ESG for a number of years. My question is on your carbon emissions. Typically, Scope 3 emissions account for over 70% of total emissions. Currently, your Scope 3 emissions account for approximately 20% of total. What steps have been put in place to measure Scope 3 more accurately?

Thank you. We have, with the support of the board last year, refreshed our ESG strategy overall and in particular, around environmental as well. Out of that, we've formed an ESG committee, which will be sponsored directed by myself. Part of that, we intend to set out, in a scientific way, the baseline as well as the measures that we will put in place to ensure that over time, we reduce our impact on environment. As you would have seen the slide on commodities, we've got coal. In the past, my answer to such questions was a simple one, where we said the portfolio of coal relative to the -- coal element relative to our portfolio of commodities that we handle, was minimal and EBITDA level was around 5%. This year, it has grown to over 20%, if I'm not mistaken. So there's some work to be done if that continues. Of course, the message that I put out forward was a very clear one that if we grow the 5 commodities that are friendly on an environmental side of things, other than mining, of course, that should then have a dilutive effect and should have a positive knock-on on the -- on our targets to contribute positively on environment.

Xolani, asked the question, how does the Port and Terminals picture look in comparison to pre-COVID? I do have the steps. I'm comfortable to respond. I mean you can build on it. I think from a volume perspective, in 2019, our Grindrod drybulk terminals achieved volumes of 11 million tonnes compared to the 16 million tonnes that we talked to in the slide deck earlier, which shows that we have uplifted on volume delivery by up to 45%. From a port perspective in 2019, they delivered 21 million tonnes compared to the 27 million tonnes in 2022. Again, that talks to a 29% uplift. Of course, that is on the back of improved infrastructure as well. The last question so far coming through online is from Bruce Williamson. Bruce asks, you never mentioned any work or opportunities with India. Since India will likely surpass China in terms of contribution to global growth. Is Grindrod involved in Indian opportunities?

Thank you for that question. We -- in our strategy, we are very clear where we participate in terms of the geographic footprint. We are in SADC, and we're moving up into the East Africa, including the DRC. That's where we operate. Of course, if you look at our IR, you'll see that we are spread out internationally. That's because of our ships agency, which requires presence in various ports for them to be able to provide a ships agency service offering to shipping lines that call multiple ports. India's importance to us is as an offtaker. And as I speak to you today, I've got my commercial team out in India, on a [ con call ] energy conference to understand the trends coming through. So from that perspective, similar to China, they remain very important to us as offtakers of what we move. We look in India as an operator of the ports. I think the answer is fairly remote at this stage. Thank you.

There are no more questions online. I'm not sure if there are any more questions from the floor.

Any other questions? Guess that wraps up our session. Thank you for coming here today, and we appreciate it.