Grindrod looks to invest in Maputo port

By SAMANTHA ENSLIN-PAYNE, September 10, 2008

Grindrod, the shipping and logistics group that recently reported a 94 percent increase in earnings to R1.1 billion in the six months to June, was investigating making a substantial investment in the Maputo port to bring it on par with Durban, South Africa's busiest port.

Alan Olivier, the chief executive of Grindrod, said yesterday that the Maputo port could be developed into a facility that could handle 40 million to 50 million tons a year.

"This would be a substantial investment that may necessitate raising additional capital," Olivier said. He declined to specify the amount needed for such a development, which could take at least 10 years.

The Maputo port was expected to handle about 8 million tons of cargo this year, up from 6 million tons last year. Before the civil war it handled about 15 million tons a year.

In the year to March the Durban port handled 42.5 million tons of cargo and 2.5 million twenty foot containers or their equivalent.

Alistair Lea, a portfolio manager at Coronation Fund Managers, said: "Without knowing the numbers, ports generally are a great investment. 

"For Grindrod it will be a great source of annuity income and diversification."

Grindrod is building up its landside businesses, which include the trading of commodities, such as grain and minerals; and freight services, which include logistics and terminals.

Lea said: "Grindrod has tried to diversify away from shipping, but this has been in bits and pieces. Such a big bang approach [in developing the Maputo port] should be … good for Grindrod shareholders."

The port master plan for Maputo would be ready in the first quarter of next year. From there Grindrod and its partner, Dubai Ports World (DPW), would decide when and how to implement it, Olivier said.

Grindrod and DPW each own 48.5 percent of Portus Indico. The balance of 3 percent is held by a Mozambican shareholder. The Maputo port is run by Portus Indico, which has a 51 percent interest in the Maputo Port Development Company. The Mozambican government and rail operator CFM hold 49 percent.

Grindrod has already invested in doubling capacity at Maputo's Matola coal terminal to 4 million tons, as well as in a new car terminal.

The ferrochrome terminal was operating at full capacity, but volumes at the car terminal - of which phase one of a three-phase development had been completed - had been slow to pick up because of motor manufacturers' contractual commitments with terminals at South African ports, Olivier said. Volumes at the car terminal were expected to pick up from the fourth quarter.

The group has also developed liquid bulk terminals and is increasing the coal terminal's capacity to 6 million tons.

Grindrod has started to invest part of the budget, estimated at $150 million (R1.18 billion), for the expansion project in the port. This includes buying a stake in the port concession, investment already undertaken and planned projects.

"But if you take the coal terminal from 6 million tons to 16 million tons, and expand bulk liquids [and] the car terminal, and possibly dredge and build additional wharfs, then a substantial investment will be required that may require the raising of additional capital," Olivier said.

Grindrod's shares were down 6.26 percent to R20.80 yesterday. The general industrial transportation sector was down 0.73 percent.