‘Weak’ shipping market sinks Grindrod earnings

Evidence that the world is still struggling to break out of the recession is seen in an 81% decline in earnings over the first six months of 2011 by Grindrod’s shipping division. The group has an owned and long-term chartered fleet of 35 vessels, of which 57% (weighted by revenue) are contracted out for the second half of 2011 and 28% (weighted by revenue) for 2012. In his interim financial report for the first six months of the year, CEO Alan Olivier says the drybulk business “despite a weaker market” achieved overall average earnings per day above average spot rates across all sectors. The tanker business experienced reduced profitability through the continued worldwide downturn in chemical and industrial production. However, Grindrod sees signs of an upturn in 2012, as there has been a “sharp spike” in medium-products tanker earnings, as well as a rise in asset prices for new and second hand tankers. Ship operating results were adversely affected by the performance of the parcel service where profitability declined due to the increase in the piracy zone, that led to increased steaming time. The South African based tanker operating joint venture with Calulo Shipping performed “well” as did the local bunker tanker business. The Rotterdam bunker barge business was affected by the depressed market as a result of oversupply. Commodity demand remains firm, however, is outweighed by the oversupply of ships.