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Transcript of 1 2007 RESULTS PRESENTATION. 2 AGENDA 2007 Results Overview of 2007 activities Shipping Trading...
1
2007 RESULTS PRESENTATION
2
AGENDA
• 2007 Results
• Overview of 2007 activities
• Shipping
• Trading
• Freight Services
• Financial Services
• Conclusion
3
2007 RESULTS
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
4
INCOME STATEMENT
2007 2006 Comments
Shipping (US$ million)
Profit from owned and long-term chartered ships 160 89 Higher shipping revenues/increased fleet size
Loss/profit from ship operating activities (14) 14 Parcel service losses
Profit from ship sales 27 35
Overheads/forex/other interest/tax/preference dividends (35) (11) Increased interest costs, lower forex profits
138 127
Shipping (R million) 982 867
Trading 63 24 Improved performance by Atlas
Freight Services 189 93 Significant improvement in rail, terminals, intermodal and seafreight divisions
Financial Services 36 15 Increased equity, growth in deposits, advances and assets under management
1 270 999
Disposal adjustment (75) 9 Closure of PicPack Grindrod
Profit attributable to ordinary shareholders 1 195 1 008
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
5
PROFIT FROM SHIPS
Bulk carriers Tankers Total
2007
Total
2006
Handysize Panamax Capesize Chemical Mid-range
product
Daily revenue (US$/day)
21 100 21 000 45 000 14 300 20 200 23 000 17 800
Daily cost
(US$/day)
8 400 9 300 21 000 9 400 15 600 11 400 11 200
Number* 19.1 2.0 4.9 5.6 6.4 38.0 36.7
Profit (US$m) 89 8 43 10 11 160 89
Owned and long-term chartered
Shipping Trading Freight Services Financial Services Conclusion2007 results
* Ship equivalents: operating days divided by 365
2007 Activities
6
BALANCE SHEET – 31 DECEMBER 2007
2007
Rm
2006
Rm
Comments
Ships (owned and chartered at market value) 13 847 10 190 Increased market value of ships/fleet growth
Other fixed assets/investments 1 983 1 420 Freight Services expansion
Bank loans, advances and liquid assets 1 195 680 Growth in the Bank
Current assets 3 080 2 238 Increased working capital requirement for Trading
Total assets 20 105 14 528
Equity 11 283 7 165 Retained profits and higher mark to market values
Net book debt 848 593
Capitalised charter obligations 3 879 4 151 PV of long-term charter obligations
Bank deposits 1 397 711 Growth in the Bank
Other liabilities 2 698 1 908 Growth in financial instruments and Trading creditors
Total equity and liabilities 20 105 14 528
Adjusted debt/equity 0.42:1 0.66:1
Shipping Trading Freight Services Financial Services Conclusion2007 results
Including ship revaluations and with chartered fleet capitalised
2007 Activities
7
MARKET VALUE OF FLEET
Rm
Book value of owned fleet 2 125
Excess of market value of owned fleet over book value
1 601 Indicative ship values obtained in consultation with reputable ship brokers
“Book value” of charters with purchase options
3 879 “Book value” = PV @ 7% of capital element (i.e. excluding running costs) of charter commitments and purchase option price. Yen options valued at closing rate
Excess of market value over “book value” of charters with purchase options
6 357 Indicative ship values obtained in consultation with reputable ship brokers
Market value of other long-term charters and contracts
(115) Differential between market rates and Grindrod charter/contract rates. PV @ 7%
13 847
Based on 2007 closing Rand / US Dollar exchange rate of R6.89
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
8
Dividends per share
46
8
12
35
52
66
78
0
10
20
30
40
50
60
70
80
90
2000 2001 2002 2003 2004 2005 2006 2007
Cen
ts
Interest cover
2.0
3.4
5.6
4.2
9.7
10.7
15.9
10.5
0
2
4
6
8
10
12
14
16
18
2000 2001 2002 2003 2004 2005 2006 2007T
imes
co
ver
KEY FINANCIAL RATIOS
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
9
KEY FINANCIAL RATIOS
Shipping Trading Freight Services Financial Services Conclusion2007 results
Return on ordinary shareholders' funds
16.1
20.2
26.7
42.4
75.774.6
57.2
50.8
0
10
20
30
40
50
60
70
80
2000 2001 2002 2003 2004 2005 2006 2007
Per
cen
tag
e
Cash v Headline earnings per share
342
263
1631
34 46
165
214
307
221
185
121
50
35
2513
0
50
100
150
200
250
300
350
400
2000 2001 2002 2003 2004 2005 2006 2007C
ents
Cash Earnings per share (cents)
Headline Earnings per share (cents)
2007 Activities
10
OVERVIEW OF 2007 ACTIVITIES
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
11
SHIPPING
• 33% revenue growth, 13% earnings growth
• Strong drybulk markets
• Stable tanker market
• High level of contract cover during year
• IVS Parcel Service losses – offset by high spot earnings in pool
• Forex loss of R10 million due to stronger Rand/ US Dollar closing rate (2006: R53 million profit)
Business focus
Owner/operator
Drybulk
- Handysize
- Panamax
- Capesize
Tankers
- Mid-range product
- Small product
- Chemical
Total fleet in excess of 70 ships
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
12
SHIPPING
• 4 ships sold – profit of R195 million (2006: R239 million)
• Ordered 8 ships
• Took delivery of 5 ships
• Contracted sale of 2 ships. Planned sale of further 2 non-core ships
• Fleet of 39 ships (excluding bunker barges) will increase to 51 by end of 2011
• Merged Unicorn / IVS into a single entity
• Favourable contract renewals by IVS Parcel Service
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
13
TRADING
• 36% revenue growth, 158% earnings growth
• Improved margins
• Strong demand for commodities
• Improved performance by Atlas Trading and Shipping
• High commodity prices – increased working capital requirement
• Upstream investment in chrome production facilities and 25% interest in a manganese mine through 50% holding in Oreport
Business focus
Agricultural commodities
- Maize, wheat, soya
Mineral commodities
- Chrome, coal, stainless steel, manganese
Bunkers (fuel) etc
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
14
FREIGHT SERVICES
• 37% revenue growth, 103% earnings growth before disposal adjustment
• Disposal adjustment – closure of PicPack Grindrod fully provided for
• Restructure completed
• Ports and Terminals, Intermodal, Rail, Seafreight and Ships Agency performed well
• Logistics affected by strikes and business closure
Business focus
Ports & Terminals
Intermodal
Logistics
Rail
Seafreight
Ships Agency
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
15
FREIGHT SERVICES
• Concluded BEE joint venture – tanker operations / bunker barges
• Expansion:
– MPDC / Maputo Coal, Car and Ferrochrome Terminals
– Increased bulk road transport fleet
– Acquired bulk liquid storage facilities
– Acquired 50% of Vanguard (heavy logistics)
– Terminal developments – Dar es Salaam, Richards Bay, Walvis Bay, Luderitz, Maydon Wharf (Durban)
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
16
FINANCIAL SERVICES
• 133% earnings growth
• Significant growth in deposits (93%), advances (127%) and assets under management (247%)
• Benefits from introduction of additional capital
• Concluded BEE transaction
Business focus
Corporate Banking
Corporate Finance
Structured Products
Retail – Smart Card
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
17
SHIPPING
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
18
SHIPPING MARKETS
Shipping Trading Freight Services Financial Services Conclusion2007 results
BULK CARRIERNew Building Prices
0.00
20.00
40.00
60.00
80.00
100.00
120.00
US
$ m
il
170K DWT Capesize Bulkcarrier New building Prices 120K DWT Capesize Bulkcarrier New building Prices 75K DWT Panamax Bulkcarrier New building Prices
23/30K DWT Handysize Bulkcarrier New building Prices 32/35K DWT Handysize Bulkcarrier New building Prices
BULK CARRIERSecond Hand Prices (5 yr)
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
US
$ m
il
Capesize 170K 5 Year Old Secondhand Prices Panamax 73K Bulkcarrier 5 Year Old Secondhand Prices Handysize 25K-30K 5 Year Old Secondhand Prices
BULK CARRIER1 Year Time Charter Rates
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
US
$ p
er d
ay
1 Year Bulkcarrier Timecharter Rates 150,000 dw t 1 Year Bulkcarrier Timecharter Rates 170,000 dw t 1 Year Bulkcarrier Timecharter Rates 65,000 dw t
1 Year bulkcarrier Timecharter Rates 70/72,000 dw t 1 Year Bulkcarrier Timecharter Rates 30,000 dw t
2007 Activities
19
SHIPPING MARKETS
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
20
0
50
100
150
200
250
<=
19
75
19
77
19
79
19
81
19
83
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
Year of build
No
of
sh
ips
Exis ting fleet On order
0
20
40
60
80
100
120
End 07 End 08 End 09 End 10 End 11
No
of
sh
ips
20-25 25-30 30+
SHIPPING MARKETS
Shipping Trading Freight Services Financial Services Conclusion2007 results
Capesize fleet profile – expanding fleet
2007 Activities
No of ships Dwt
Existing fleet 775 133,253,676
NB total 624 116,517,380
% of Fleet 81% 87%
% over 30 years 0% 0%
21
0
50
100
150
200
250
<=
197
5
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
Year of build
No
of
ship
s
Existing fleet On order
SHIPPING MARKETS
Shipping Trading Freight Services Financial Services Conclusion2007 results
Handysize fleet profile – declining fleet
408
544590 614
659
113 130169
310 310
0
100
200
300
400
500
600
700
800
900
…end 07 …end 08 …end 09 …end 10 …end 11
25-30 30-35 35+
No of ships Dwt
Existing fleet 2,835 75,652,728
NB total 598 18,535,826
% of Fleet 21.09% 24.50%
% over 30 years 23.63% 21.54%
2007 Activities
22
MARKET OUTLOOK
Drybulk
• Fundamentals remain strong with the East driving the drybulk markets
• Recent downturn in spot rates caused by a number of short-term factors (delay in ore price agreements, Brazilian port down time, etc.)
• Market has recovered substantially with limited effect on long-term charter rates and ship prices
• Continued growth in cargo movement – China still a big driver with India adding momentum to increased demand
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
23
MARKET OUTLOOK
• Growth in coal / iron ore movements will offset capesize fleet growth in short-term but expect normalisation towards end of 2009 as newbuildings deliver
• Increased scrapping expected as scrap steel prices remain high
• Handysize market still has very good fundamentals - an old fleet and a growing demand for these ships
• Limited impact from slow down in world economy expected
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
24
MARKET OUTLOOK
Tankers
• Continued growth in demand:
– Slow down of growth in West offset by increased demand in East (China / India)
– Refining capacity to be built in supply areas, resulting in increased tonne miles
• Legislative / environmental restraints will force scrapping of older vessels
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
25
MARKET OUTLOOK
• However, still possible oversupply of larger product tankers from big order book in short-term
• Small product and chemical tanker markets have more favourable outlook:
– Old fleet (30% single hull) and limited newbuildings due to yard capacity constraints
– Increased demand from regional trades and feedering requirements
– High stainless steel prices limit further substantial investment in the chemical sector
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
26
STRATEGY
• Capesize / panamax:
– Expand cover from 2010 through growing cargo base / re-let of panamax
• Handysize / handymax:
– Maintain some open position
– Parcel Service contracts – index linked or hedge to lock-in margin
– Expand ship operating capability
• Products tankers:
– Increase cover in 2009 / 2010 as new ships deliver
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
27
STRATEGY
• Chemical tankers:
– Continue to employ in the joint service to take advantage of anticipated growth in market and market position
• Vessel acquisition:
– Limited in short-term due to high pricing
– Will look for opportunities to grow handysize fleet
• Any future weakness – buying / expansion opportunities
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
28
FLEET OVERVIEW
Contracted in at 31/12/2007 Bulk carriers Tankers Total
Handysize Panamax Capesize Chemical Mid-Range
Small
2008 Number 20.5 2.0 4.1 4.0 7.5 1.0 39.1
Cost (US$/day) 8 700 9 200 20 000 14 800 13 400 8 500 11 400
2009 Number 18.0 2.0 3.0 4.0 9.3 3.4 39.7
Cost (US$/day) 8 400 9 200 21 500 14 700 13 400 9 200 11 300
2010 Number 18.3 2.0 3.0 4.0 10.0 6.6 43.9
Cost (US$/day) 8 400 9 200 21 000 14 700 14 300 10 000 11 500
2011 Number 19.5 2.0 3.0 4.5 10.0 9.5 48.5
Cost (US$/day) 8 400 9 200 27 800 14 700 13 800 10 200 11 700
Current fleet 21 2 5 4 6 1 39
Net Number of Ships to Deliver
2008 -2 - -1 - 2 1 -
2009 -1 - -1 - 1 3 2
2010 1 - - - 1 4 6
2011 2 - - 1 - 1 4
Fleet at end of 2011 21 2 3 5 10 10 51
Shipping Trading Freight Services Financial Services Conclusion2007 results
NB: excludes short-term chartered and ships operated in Freight Services. These total +/- 30 ships
9 owned
30 chartered
20 owned
31 chartered
2007 Activities
29
CONTRACTED PROFITS
Contracted out at 31/12/2007 Bulk carriers Tankers Total
Handysize Panamax Capesize Chemical Mid-Range Small
2008 Number (average)
Revenue (US$/day)
15.2
24 500
2.0
20 900
3.5
35 100
2.0
19 800
6.1
20 700
0.9
12 000
29.7
24 000
2009 Number (average)
Revenue (US$/day)
2.4
19 800
2.0
20 800
2.4
37 300
1.5
21 700
6.2
20 600
1.5
14 800
16.0
22 600
2010 Number (average)
Revenue (US$/day)
0.2
17 000
1.2
20 700
1.4
40 200
-
-
5.7
20 500
1.5
14 800
10.0
22 400
2011 Number (average)
Revenue (US$/day)
-
-
1.0
20 600
1.9
40 300
-
-
2.4
22 000
1.1
15 000
6.4
26 000
Contracted profits (US$m) % of fleet
fixed
Charters
US$m
Ship sales
US$m
Total
US$m
2008 75 132 46 178
2009 45 53 - 53
2010 29 32 - 32
2011 21 20 - 23
Shipping Trading Freight Services Financial Services Conclusion2007 results
In addition, +/- 10% of fleet is fixed from 2012 to 2015
2007 Activities
30
TRADING
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
31
MARKET OUTLOOK
• Growing demand for commodities:
– Food and feed requirements
– Bio fuels
– Steel production requirements
– Shipping requirements for bunkers
– General world economic growth particularly in the East
• The growth / demand is expected to continue in the long-term
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
32
STRATEGY
• Consolidate under a new Trading CEO
• Cautious investment in origination and infrastructure
• Co-operation with Freight Services and Shipping
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
33
FREIGHT SERVICES
Shipping Financial Services Conclusion2007 results 2007 Activities Trading Freight Services
34
MARKET OUTLOOK
• Continued demand for commodities from sub-Saharan Africa
• Catch-up required in infrastructure spend:
– Ports
– Terminals
– Rail
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
35
STRATEGY
• Further simplification and streamlining of the divisional structure:
– Ports and Terminals
– Intermodal and Logistics
– Rail
– Seafreight
– Ships Agencies
– SA ship operations / bunker barges
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
36
STRATEGY
• Exit from non-core businesses
• Expand port and terminal investments in Maputo (MPDC), Richards Bay, Durban and Walvis Bay
• Bring on-stream potential new terminal projects
• Refocus rail strategy
• Black Economic Empowerment
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
37
FINANCIAL SERVICES
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
38
MARKET OUTLOOK
• Continued economic growth in SA
• Banking sector impacted by sub-prime crisis, higher interest rates, National Credit Act
• Substantial infrastructure and commercial investment requirements
• Opportunity for a well structured niche bank in the SA market
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
39
STRATEGY
• Grow deposit base
• Focused, secure lending book
• Generate annuity income from:
– Asset management
– Investment products
– Retail fees (Net1)
– Treasury management
– Advisory
• Brand roll out with more visible market presence
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
40
CONCLUSION
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
41
CONCLUSION
• Four distinct operations: Shipping, Trading, Freight Services and Financial Services
– No significant synergies– Different risk profiles– Management focus essential
• Future unbundling / disposal / merger / international listing of shipping all under consideration
• Timing to be triggered by need for capital / market conditions
• Improve shareholder value through:
– Attracting specialised investors– No conglomerate discount– Simplified operations / easier to analyse– Broaden shareholder base
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities
42
CONCLUSION
Sound prospects
• Shipping:
– Long-term charter rates / ship prices indicate expectation of a firm shipping market in the medium-term
– Contracted growth in fleet = 30%– Contracted earnings (2008 = 75% of fleet fixed, 2009 = 45%, 2010 = 28%) – Expectation of weakening of Rand (10 cent move = estimated R20 million income
statement impact)
• Trading, Freight Services and Financial Services well positioned for growth:
– Capacity to invest in expansion– New projects coming on stream
• Focus on ports and terminal business
• Successful, experienced management team
Shipping Trading Freight Services Financial Services Conclusion2007 results 2007 Activities