Grindrod gets a grilling as it splits shipping into Nasdaq
This week the logistics group finally jettisoned its original maritime business. The chairman tells why
Grindrod without the shipping is a bit like bacon without eggs. And yet, this week, the logistics group finally jettisoned its original maritime business, which is now primary listed on Nasdaq with an inward offering on the JSE. In announcing the split earlier this year, Grindrod said it had contemplated a separate listing of the shipping business for “many years”. We asked chairman Mike Hankinson whether those were the bad years post the financial crisis, or whether this was on the cards all along.
There have been a number of occasions, going back to even prior to 2008. It has been something that has been on the agenda of the group for many years and shipping is a very cyclical, specific industry. This is the time that we said that the market looks like it’s ready. At the initial discussion time when I got involved, about 12 months ago, the comment made to me was that if we were going to list maybe we were six months too late, maybe we’re six months too early – it doesn’t matter. It’s done and it’s the right process, right principle, right decision for the group.
Is Grindrod Shipping now fully independent of the Grindrod group?
It is. There are some contracts with the old Grindrod Limited which will be phased out, I would guess, over the next five years or so; IT systems, that type of thing. But effectively it’s got its own board, a chairman, new non executive directors, chief executive and CFO who are now on their own. Effectively for every 40 shares in Grindrod Limited (shareholders) received one share in Grindrod Shipping.
Where does Grindrod Shipping sit in the global pecking order of shipping companies?
When we first started this process, we considered whether we shouldn’t adjust the group because we are in the dry bulk category and the tanker category and many companies specialise in one or the other – there are not a lot of them that cut across many categories. And we took advice from all the shipping specialists globally and the comment to us was: you guys have been around for years and years, Grindrod is 100-year old company, so stay like that, don’t change, don’t go through a process of exiting one right now. So we decided to continue. We are smallish in comparison to some of these huge players that are around, but we’re not the smallest.
Was there any particular reason why you chose US markets and the Nasdaq in particular?
We looked at Singapore, we’ve got offices there, we looked at Hong Kong, at Oslo, at London and it was clear in our analysis that the shipping market is New York or Nasdaq. We’re now in a situation where we will be comparing ourselves with everybody else. We’re on the world stage and if we’re good we have to show we’re good. In Johannesburg there are no shipping companies and with respect, analysts don’t cover shipping and don’t really understand it.
The NAV of Grindrod Shipping at listing was $320-million, on Thursday the stock dropped as much as 22% … how has the reception been since listing?
This has been quite a difficult process and we had to be quite careful in what we said pre-listing; we were precluded in many ways from doing a full-on marketing job and had to wait for the listing and it’s quite a complicated transfer process between the JSE and Nasdaq so it’s going to take a bit of time for that share to settle.
A lot of Grindrod investors have been quite frustrated with its performance over the past three years … so will this be the value unlock that shareholders are desperate for?
That’s absolutely the plan and this is very much a value unlock proposition. In addition to that we have done some major clean-ups, we’ve exited the rail locomotive business, the construction business. We’ve exited the rail signalling business and even looking at shipping, we took an impairment last year of about R600-million to effectively impair our ships to market value, so these were all steps taken to put Grindrod Ltd in a better place for the future and we think we’re getting there.
Getting there – does that mean it’s going to be a long slog?
If I were to say to a shareholder now, we’ve done everything, we’ve listed shipping and we’re now sitting on our hands – we’re not. There are a few other things we’re still doing.
What are they?
We’re not in a position to openly talk about them but we will as soon as we can.
Grindrod shares haven’t benefited from the uptick in the commodity sector of the past two years – why not?
I think it will. The clean-up process has probably hampered that and the impairment of shipping and the exit of the rail business cost us. There has been an underlying improvement. We absolutely are in the space of improved commodity prices, whether it be magnetite or coal, volumes are there.
So one should expect a better performance?
That’s what we’re hoping for.