A very warm welcome, ladies and gentlemen, to Grindrod's interim results for the 6 months ended 30 June 2025. My name is Reshmee Soni from Investor Relations. I will be facilitating the presentation this morning. Our speakers today, Xolani Mbambo, Chief Executive Officer of Grindrod Limited, and CFO, Fathima Ally. We are delighted to welcome you, our analysts, shareholders, members of the management team to this morning's session. Online, we have our Chair, Cheryl Carolus, our Independent Lead Non-Executive, Nkululeko Sowazi, and our Independent Non-Executive Directors, Zimkhitha Zatu Moloi, and Raymond Ndlovu. We'd like to welcome you all this morning. I request you take a moment to peruse the forward-looking statement on the screen. We will commence this morning's presentation with an opening video, an overview of the business by Xolani, a financial overview by Fathima, followed by an outlook by Xolani. We will then proceed to the Q&A session.
Let us commence with the opening video.
At Grindrod, we continue to drive our strategic focus on the core business, delivering integrated, cost-effective, and efficient logistics solutions. We have undergone a multi-year journey of exiting non-core operations, including recent divestments from the Marine Fuels business and the North Coast property loans exposure. We have recently completed the acquisition of the remaining 35% stake in the Matola terminal, thereby achieving full ownership. This marks a significant milestone in our commitment to providing an integrated service spanning the entire value chain, from mine to port to global markets. Following disruptions at the Maputo border in Mozambique late last year, the corridor has shown a strong recovery. The Port of Maputo is now delivering faster turnaround times and processing record volumes. In July, the port achieved its highest monthly throughput of 1,523,041 tonnes and recorded the highest daily volume.
This performance demonstrates our commitment to sustainable cargo flows. In May, our dry bulk terminal in Matola achieved its highest monthly throughput ever, over 1,075,000 tonnes. The team also set a new 24-hour loading record of 78,500 tonnes, surpassing all previous achievements, a testament to our team's commitment to excellence. In May, we marked another proud moment, signing a concession agreement with Transnet National Ports Authority to develop and operate the container handling facility at the Port of Richards Bay in partnership with Grindrod Eyamakhosi. We are pleased with the progress on the overhaul program of the 13 locomotives repatriated from Sierra Leone. These locomotives are critical to Grindrod's participation in South Africa's rail reform, which is expected to be implemented imminently.
Our strong leadership, purpose-driven approach, and sharp strategic focus position Grindrod to deliver cost-effective and efficient and reliable solutions for our customers, driving growth across Africa's key trade corridors. Grindrod, moving cargo, powering trade, shaping the future, and positively impacting our communities.
All for Africa.
For our people. For communities.
For collaboration. For the world.
For growth.
Thank you, Reshmee, welcome to our shareholders, shareholder representatives, the analysts, funders, and media who are in attendance this morning. I also would like to make a special welcome to some of our staff who I know are listening in. I also would like to recognize our Chairperson, Cheryl Carolus, the Chairperson of the Investment Committee, who is also the Lead Independent, Nkululeko Sowazi, the Chairperson of the Audit Committee, Zimkhitha Zatu Moloi, and the Chairperson of our Remuneration Committee, Raymond Ndlovu. Thanks for joining us. I am looking forward to delivering our interim results and sharing some key milestones in our strategy execution, which we achieved in the first half of this year. This morning, we are sharing the time with a very important media briefing from the Department of Transport, perhaps it will be a good starting point for this webinar. Our strategy remains clear and simple.
It is to deliver integrated, cost-effective, and efficient logistics solutions for our customers. Rail, for us, is a key enabler in achieving this strategy and to ensure sustainability of the customer's cargo flows. The South African Open Access initiative allows us to do so. We have our locomotives fleet, which we repatriated from Sierra Leone to support this initiative. The South African Open Access process also presents a strategic point of entry for Grindrod. How we can contribute meaningfully to South Africa's drive to restore its rail network performance to its glory days. It is indeed our firm belief that this morning's announcement by the department will initiate a process of understanding how South Africa's open access system will function, and hopefully confirm Grindrod's contribution. We are committed and have spent many months this year and last year in readiness. With that, I will move on to the macroeconomic overview.
If you look at the slide, global growth at 3% is reflective of the overall continued slowdown, trade tensions due to the U.S. position on tariffs, and policy uncertainty. China's economy is steady at 4% growth, while India is projected to remain the fastest-growing major economy and a bright spot for commodity demand. South Africa is showing marginal growth, and we know that its economy is facing structural challenges. Mozambique's recovery at 3% growth for 2025 is welcomed following the disruptions late last year. We also think that there is a potential upside in Mozambique from oil and gas projects up in the north. If we now turn our heads to the commodities. While the global backdrop of policy uncertainty continues to influence investment and trade flows and acts as headwind for economic activity, demand for commodities has been somewhat mixed.
Some we're seeing some movements and others are slowing down. We have seen persistent price softness affecting key commodities including iron ore, chrome, lithium, graphite, and coal. The new tariffs imposed by the U.S. could introduce further volatility across commodity markets. Let's get to the exciting part. If we look at our performance, nothing matters more than safety of our people. The Basopa campaign, which is a safety campaign that we implemented some two years ago, continues to deliver positive outcomes. Our lost time injury frequency rate was 0.27. That outperformed our target of 0.4. The business operated for more than 14 months without fatality. We are pleased with that. Operationally, the start of the year was marked by resumption of the Maputo corridor following disruptions late last year.
Volumes recovered in the second quarter, with Matola Terminal achieving a monthly record of 1.1 million tonnes and an average monthly run rate of 2.5 million tonnes across the entire Grindrod terminals during the second quarter. This marks an uplift of 13% from the first quarter, a strong recovery. The financial performance was resilient. We collected cash of over ZAR 900 million from non-core asset divestitures. We generated ZAR 139 million from our core operations. You'll also see that in our balance sheet, we've accumulated cash of ZAR 3.2 billion. This with an outflow of ZAR 1 billion already spent on Matola Terminal corporate transaction. May I remind you that this balance was ZAR 2.5 billion when we closed the year in December last year. We've added net ZAR 700 million to our cash in the bank.
With this strong liquidity, a sustainable ordinary dividend of ZAR 0.23 per share was approved by the board, in line with our guidance of between three and four times cover on core headline earnings. In addition, in line with the precedent that we set when we collected ZAR 1.5 billion from the sale of Grindrod Bank in 2022, you'll recall that was a Christmas gift, the board approved a special distribution of ZAR 225 million, which is 25% of proceeds collected from non-core asset exits, which I've mentioned just now at ZAR 900 million. This amounts to an additional special dividend of ZAR 0.323 per share. The total dividend, therefore, is ZAR 0.553 per share and a total of ZAR 386 million that we are distributing to the shareholders.
The balance of the proceeds, of course, was applied to non-core debt and also to shore up our balance sheet for growth projects going forward. We now turn into specific segments. In our ports and terminals, the Port of Maputo prioritized both the reliability and sustainability of the Ressano Garcia Corridor, implementing key initiatives at the border and achieving enhanced rail turnaround times. As a result, the 400,000-tonne shortfall that we recorded in the first half was fully recovered in July, when the port handled a monthly record of 1.5 million tonnes in that month. Likewise, Matola Terminal continued its positive trajectory, recording growth of 16% on year-to-date volume performance in July. This was an uplift from the 8% growth that you see on the slide. For the first half of this year. The performance of Matola Terminal asset reaffirms our investment in buying up this asset.
If we turn to logistics, the performance in logistics declined due to low rolling stock utilization, but our ships agency clearing and forwarding businesses stayed strong. The low rolling stock utilization was anticipated while we overhauled Sierra Leone locomotives for South African Open Access. We remain patient and confident in this rail strategy. In the meantime, we are deploying overhauled locomotives short-term as they come out of the workshop. Zooming in on our locomotives overhaul program. Of the 13 Sierra Leone locomotives, four have been completed and deployed in July. Five locomotives are expected to be completed in August and September. We have alternative deployment opportunities for those should the open access process take longer. The remaining four locomotives are planned to be completed early next year. We adjusted our original overhaul program in line with our assessment of the timing of the open access implementation.
On that note, I now hand over to Fathima for the financial performance review. Thank you.
Thank you, Xolani. A very good morning to everybody on the call from my side, and a warm welcome as well. It certainly is my pleasure this morning, to report on and to talk to you about the resilient results Grindrod has delivered for the first six months of this financial year. The performance largely underpinned by the major corporate transactions that Xolani mentioned a few minutes ago. The first being the buyup of our Matola terminal, and the second, of course, being our divestment from Marine Fuels. If we had to focus on our segmental income statement, which of course, means that our ownership in our joint ventures are proportionately included in each line on the income statement that you see before you. Effectively, our core revenue has come off 8% in the first six months of this year.
Again, with the backdrop that Xolani gave, a large portion of this attributable to the constraints we achieved in the logistics segment, particularly out of rail deployment, as well as volumes in both the container and the graphite businesses. Having said that though, our trading profit from our core business held firm at 29%, which marks it 2% ahead that reported in the previous financial period. We did experience a windfall in the first six months. We managed to settle with our insurers on our COVID-19 business interruption claims that have been pending from 2020, and with that, we were able to book additional earnings of approximately ZAR 106 million in the first six months. Stripping those out, margins still held firm and revised or normalized margins would have approximated 26%.
The big move in revenue and trading profit from a non-core perspective, again, is due to the fact that there is no inclusion of Marine Fuels, and the numbers reported are for the performance for the first four months of this financial year compared to the full six-month profile in H1 2024. Our non-trading items certainly are material number and again, twofold coming out of both the Matola buyup as well as the Marine Fuels divestment. Essentially both Marine Fuels, and the Matola business were joint ventures in Grindrod's financial statements. From an accounting perspective, when we buy up on a joint venture and effectively consolidate, we are required to derecognize the joint venture and essentially account for any profits relative to our carrying value and what the fair value of that joint venture is.
Additionally, because that investment was a US dollar underpinned investment, we are required to release any foreign currency translation reserves that we hold on the balance sheet within equity to the income statement as well. Accordingly, the ZAR 899 million of non-trading items in the core business relates to ZAR 937 million of gains out of Matola, and then that was offset somewhat through our logistics segment with certain PPE impairments. On the non-core side, similar to Matola, we recognized a loss on Marine Fuels, but there were certainly foreign exchange gains that offset those reflecting the ZAR 34 million. Our share of associate earnings largely represent our earnings from the port in Maputo, and again, considering the backdrop with volumes down 6%, it's been a notable financial performance coming through from the port.
Our taxation held firm for our core business with effective tax rates sitting at 30%, and this is once you adjust our profit before tax for the non-trading items as well as the associate earnings, as those are already reported post-tax. The non-core taxation largely influenced by the proceeds we received out of the Marine Fuels divestment, attracting some tax consequences for us in Singapore. Overall earnings for the group for this six-month period sat firm at ZAR 1.5 billion, with headline earnings at ZAR 592 million, 23% above that reported in the previous financial period.
Our core business headline earnings held firm and were flat compared to the prior year at ZAR 562 million, essentially amounting to ZAR 0.843 of core headline earnings per share. If we spend a little bit of time introspecting on each of our segments, our port and terminals revenue, you'll see a reduction of 5%, again, very much in line and correlating with the drop in our dry bulk volumes from the Grindrod businesses of 5%, as indicated by Xolani earlier. Overall, strong EBITDA margins and headline earnings for this segment, 13% above that reported in the prior year. The EBITDA margins are 40%. If you consider normalization for the once-off insurance proceeds I talked to earlier, the margins still held firm with a 3% uplift, and it would reflect at 36% overall. You can see that our return on equity is somewhat muted relevant to the comparative period.
This is because of the significant investment that we have made in this segment, specifically with the Matola business, where our equity bulked up ZAR 2 billion from a ZAR 4 billion base to a closing equity base just over ZAR 6 billion for port and terminals. Overall, this segment still largely anchored as a U.S. dollar business with 89% of our EBITDA earned offshore. Our logistics segment, again, impacted by the constraints we talked about earlier, at a revenue, at an EBITDA as well as the headline earnings level, the rail deployments as well as the volumes in the graphite, as well as containers. From a margin perspective, our transport brokering, as you know, comes in at extremely low margins for us.
Normalizing for this as well as the one-off COVID-19 insurance, we still report firm EBITDA margins at 26%, largely in line with the stable performing businesses of ships agency and clearing and forwarding. If I progress to our balance sheet, what we have done with respect to December 2024 is that we have represented this so that you see the effects of Matola accounted for at 100% to assist with comparability between December and June. The numbers reported on in June would have reflected our ownership at 65% at that point in time. The ZAR 1 billion that Xolani mentioned earlier spent on the Matola acquisition, that accounts for 86% of the ZAR 1.2 billion of capital expenditure we've incurred in this period. Our property, plant, and equipment and right to use assets reduced by 8%.
Most movements are assets, but most notably, our depreciation and the translation impacts contributed significantly to that decline. Intangible assets grew by ZAR 1.5 billion, again, underpinned by the Matola transaction, where we've recognized goodwill as well as customer relationships coming out of that transaction. As you are aware, we collected our proceeds on the disposal of the North Coast property loans towards the end of quarter one, hence the nil balance reflected. From a working capital perspective in our core business, the 7% reduction is largely representative of good collection disciplines that underpinned our performance in the first six months.
From a liabilities perspective, whilst our creditors increased by 25%, this is largely timing related due to deferment payments that progressed in July, as opposed to having been made in June in our clearing and forwarding businesses, as well as approximately ZAR 211 million of additional liabilities recognized out of the Matola transaction. Our bank balances on a proportionate basis, sitting at ZAR 3.4 billion after having recognized the outflows for having paid for Matola, a 35% buyup, as well as the inflows from the divestment and seeing to certain repayments in our interest-bearing borrowings, which contributed to that 17% reduction. Our borrowings sitting at ZAR 3.9 billion, saw repayments of close to ZAR 590 million, as well as certain non-cash downward movements in lease liabilities of ZAR 195 million. Our balance sheet closed strong with just under ZAR 10 billion of equity.
If we look at how Grindrod's net debt has performed in this period, we closed the December financial year reflecting net debt using our operational cash of ZAR 1.5 billion. We have effectively recycled in rinsed cash that was effectively parked for the Matola transaction financing, and together with the ZAR 1.5 billion, you see that we opened the period with net debt of ZAR 413 million. Our trading for the first six months secured us cash generated from operations of ZAR 439 million, and that represents an 80% cash conversion relative to our EBITDA line. We sought our interest, dividends, and taxation, and spent ZAR 165 million, and the Matola take on introduced net cash for us out of that terminal of USD 18, which approximated ZAR 316 million in rand terms.
The massive outflow due to our capital expenditure, both from Matola buyup as well as ZAR 150 million of normal capital expenditure accounts for the ZAR 1,185 million. The proceeds coming in of ZAR 952 million relate to the disposal of the land loans of ZAR 500 million. Our SIRE deferred consideration, we managed to get a tranche of payments in at the beginning of the year to the tune of ZAR 43 million. And then, of course, the Marine Fuels proceeds of ZAR 402 million. We closed the six-month period at a net debt level of ZAR 23 million as of June. If we look at how our gross debt has performed for this six-month period, effectively, our gross debt has increased 10% from ZAR 2.9 billion to ZAR 3.2 billion. A big driver of that is the significant concession-linked lease liabilities the buyup of the Matola terminal introduces onto our balance sheet.
That is resulting in the increase from lease liabilities from the ZAR 578 million up to the ZAR 1,168 million you see in the bar graphs on the screen. That was offset quite significantly by borrowing repayments that we executed on, offset by interest as well, which accounted for ZAR 364 million. Overall, we closed the six-month period effectively with a balance sheet that is ungeared and with debt capacity sitting at approximately ZAR 4 billion. With respect to certain of our high-probability and medium-probability projects, we expect that up to 60%-65% of this capacity will be taken up in the next 2-3 years. And with modular increase in EBITDA from expansions and projects being executed, we then are able to see and secure additional capacity for certain of our inorganic M&A activities. On this note, I hand you back to Xolani.
Thank you, Fathima. Good news indeed. In this slide, I like the lease liability increase because it reflects our sub-concession extension. So I say it is a good debt. Moving on to the outlook. Our capital allocation framework continues to instill discipline and deliver both consistent shareholder returns and value-driven growth. As Grindrod pursues responsible growth and maximizing value for shareholders, capital allocation priorities include maintaining same business capital expenditure, supporting our growth pipeline, aiming for a sustainable shareholder distribution, either by way of a dividend at a cover of 3-4 times core headline earnings and/or opportunistic share buybacks in terms of deep share price discount to our net asset value.
To this end, of the total capital allocation of ZAR 1.6 billion during the first half, we allocated ZAR 109 million in the same business CapEx, spent ZAR 1 billion in Matola terminal buyup, which is reflected in the ZAR 1.1 billion growth CapEx, and distributed a total of ZAR 386 million to the shareholders as I've indicated earlier. We believe that this is a balanced approach in capital allocation, ensuring that we continue to maintain a healthy balance sheet going forward. In conclusion, as we look forward, we remain focused on our strategy. It guides and drives value for our stakeholders. Safety continues to remain top of mind. Our growth is focused on delivery of operational excellence, solid and sustainable volume growth, and disciplined cost management.
This means ensuring we improve turnaround time for inbound cargo, delivery of same business at the lowest capital cost, and ensuring the completion of the locomotive overhaul program, amongst others. At a strategic level, it is imperative that we are clear on unlocking rail as a key enabler, embedding Matola terminal as a fully owned asset. Recapitalizing our dry bulk assets in Richards Bay, particularly looking at exploring bulk capacity increase, as well as in Durban. Progressing our Quayside container handling facility project in Richards Bay, and completing our state-of-the-art rail-linked container depot handling facility in Salt River in Cape Town. In time of global uncertainty, we remain flexible in our capital expenditure and sequencing growth project implementation in response to market dynamics, cash flow generation, and balance sheet capacity headroom. Grindrod offers an attractive investment value proposition.
We own long-term strategic infrastructure assets that are difficult to replicate, and we will continue to add to these as we grow. We have service offering in the value chain, enabling us to provide integrated logistics solutions. We have a purpose and a clear strategy that will drive our growth agenda and focus on disciplined capital allocation, ensuring consistent shareholder returns. On that note, I'll let's give it back to Reshmi.
Thank you, Xolani. We'll now commence the Q&A session for the morning. Once again, thank you for your participation. We see that we have well over 100 of you online. We have a first question, and if I may ask our Chair online to assist us with that question. Chair, we have a question. Can you comment around the process of the new CEO, and are there any internal candidates?
Thank you very much, Reshmee, and thank you for the question. Let me just start off by saying that from the board's side, we're obviously very sad to be saying goodbye to Xolani. He has served the company well.
We also wish him very well in his future endeavors. We also want to say that the company is in a good place. As you know, you would have seen and heard the results now that Fathima and Xolani have shared with you. We have a great strategy in place. We've got a good team in place underpinning that strategy and delivering on it, the results that you've just seen. We're sad, but we also want to reassure everybody that there's a process in place, and the process is going well. We are working closely with a talent search specialist, and we're looking both internally and externally, and the process is underway. We haven't yet started the process of shortlisting.
We also note the fact that Xolani is with us, his notice period ends at the end of December, he has committed to stay until at least that time, and it is our hope that we will finalize this process before his notice period expires. Thank you, Reshmee.
Thank you, Chair. If I could go to the next question, I think perhaps Xolani has a comment to lead on to that. Thank you, Cobus, from Value Capital. Congratulations to the Grindrod team on a great set of results. Xolani, thank you for your strong leadership and contribution to Grindrod. As a shareholder, sad to see you move on, although very grateful for your contribution. If we move to the next question. Rowan, good morning from Chronux Research. Can you give an update on Northern Mozambique activity levels?
Thank you, Rashmee. Thank you, Cobus, for your kind words. For Northern Mozambique, you would have read in the media that there is an upbeat around the activities resuming. We are certainly receiving inquiries. At this stage, we rely on TotalEnergies resuming operations. The media indications are that this is imminent. We were hoping that it would have started in the beginning of July, but we remain hopeful. In terms of our modeling and the numbers, none of it is embedded in our numbers at this stage. Thank you.
Thanks, Xolani. The next question we have from Na'ilah Ebrahim, News24. Thank you, Na'ilah. Good day. My question is as follows: Does Grindrod believe the volumes have fully recovered from the disruptions in Maputo last year? What specific logistics constraints hampered both port and dry bulk volumes?
Okay. You'll have to repeat the second one, but let me take the first one. The volume fully recovered from Maputo, as I've indicated in my presentation earlier. If I go by the recent performance records, the Maputo MPDC-operated terminal in July achieved a record of 1.5 million tonnes. If you look at the border at the moment, we are nicely averaging over 1,000 trucks a day, which is an indication for me that the constraints, at least on the Mozambican side, have unlocked, and I'm equally upbeat that on the South African side, it will continue to unlock. I also mentioned that the trains that are flowing into the main port of Maputo, delivering chrome, have also improved somewhat. Additionally, what is exciting is the chrome coming out of Zimbabwe.
It's in public domain that there is an agreement between the National Railways of Zimbabwe, as well as CFM in Mozambique, to allow CFM to collect cargo. I think it goes into Zimbabwe's rail network some 160 kilometers to collect the chrome. We're hoping that we'll see an increase or an uptick in those volumes. You are fully aware that from Grindrod's side, we've got a siding in Eswatini where we are using the Goba line as an alternative channel so that the cargo flows. It seems to be working well. We are also expecting to resume an operation on the second siding, moving an alternative cargo other than coal, so that we continue to feed our facility. From the constraints perspective, I'm fairly comfortable that we are able to unlock it.
Secondly, I am comfortable that we seem to have fully recovered in terms of the flow of cargo into our terminal in Maputo and Matola.
Thank you, Xolani. The next question from Rowan Goller of Cronax Research. Are your locomotives fit for purpose for the third-party rail access opportunities, and do you need to seek additional locomotives?
Thank you for the question. As you may be fully aware, in terms of the South African Open Access, you apply for a particular corridor. I can comfortably say that for the corridor that we applied for, our locomotives are suitable for usage or at least for navigating on that rail line. The idea is that, or the strategy that we are adopting is that we will be using our existing fleet to ensure that we achieve an entry into the corridor. We understand what the issues are that come with that operation, including the interface, the use of the infrastructure along the route, the cross-border, clearing et cetera. Once we are comfortable, that will then result in us approaching the board, once utilization is more than 90% of our fleet, to then have an incremental investment. Thank you.
Thank you, Xolani. We're not seeing any more questions online. That then concludes our question and answer session this morning. Perhaps before I do close the webinar, Xolani, I'm going to hand over you for a few remarks.
Thank you, Reshmi. As I bow out, I take this opportunity to express my gratitude to the chairperson, Cheryl Carolus, and the chairman of the investment committee, who is also the Lead Independent, Nkululeko Sowazi, for their guidance, counsel, and wisdom during my tenure. I'm also grateful to the rest of the Board of Directors for their unwavering support, and to the management team for their hard work towards achieving our strategic objectives. You have made me shine. I thank you. I'm also grateful for our employees' unrelenting commitment to our purpose to promote Africa's trade with the world, touching lives in the communities in which we operate. I will surely miss your enthusiasm, engagement, and visits to your operational sites as you take me through some continuous breakthrough innovations you implement every day, or record-breaking performances. Please continue with that, even in my absence.
To you, our shareholders, shareholder representatives, the analysts, funders, and media, thank you for your trust and engagement. I am sure I will cross paths with many of you in my new role. Grindrod is an exceptional business driven by dedicated, focused, and determined people who have all been a great inspiration to me. I wish the entire Grindrod family every success.
Thank you, Xolani. Thank you. Thank you everyone once again for joining. Your support and engagement is highly appreciated. We look forward to engaging you in the coming weeks. If you have any further questions, please do not hesitate to contact me. Once again, thank you everyone for joining, have a good day further. Thank you