Grindrod’s curb on dividends pays off

Shipping group Grindrod’s decision not to pay special dividends to shareholders when business boomed has paid off, as the group is in a strong position to take advantage of grim markets to expand its fleet.
Business Report newspaper this morning quotes company CE Alan Olivier as saying he has always cautioned those who told him the group’s dividend policy was not “as aggressive” as that of other shipping firms that “there will be times when we need money and it will be difficult to raise it”.

Now, as the shipping industry tries to cope with sharply lower volumes and lack of finance, Grindrod is able to stick to its plan to spend R3.2 billion in the next few years, of which R2.8 billion will be used to buy ships.

New acquisitions would be financed by cash resources, cash generated from operations and committed bank finance facilities, Business Report adds. The group’s financial strength had enabled it to decline business from counterparties it considered to be risky. “In weak … markets you have to make sure the contracts you have are good,” Olivier said.
“While Grindrod is biding its time for the right moment to make a significant acquisition, other shipping companies are restructuring debt or in some cases going under. Shipping companies in Korea and shipyards in Germany are being bailed out by governments,” Business report adds.  

Grindrod may now be able to repeat its successful strategy implemented eight years ago. Alistair Lea, a portfolio manager at Coronation Fund Managers, said the reason Grindrod had made so much money in the past three years was because when the shipping market was in the doldrums nine years ago, the firm was brave enough to lock in its current fleet at low rates.