Grindrod Limited (GND) Earnings Call Transcript

Good morning, and welcome. Very nice to see you all sitting with us today. I know we've done a couple of these now, but it's good to be back meeting with people again. We had a function with customers last night, and it was really nice to engage with all of them. We obviously thank them profusely for their business, which is how we can report these results, obviously. But very nice to see you all and a special welcome to our Chairman, Cheryl here on my left; and outgone Chairman because he's now gone, Mike Hankinson, still has lots of shares in the company so he's very interested as a shareholder; and a number of Board meetings, I saw Deepak, Walter, Zim, I'm sure, is here. So thank you very much for your support as a Board. And yes, obviously, to all of you as the shareholders that have been with us for many, many years. Thank you. We're going to start with a video clip, which is a little bit longer than normal, showing you a little bit about what we've experienced in the last 6 months. And then we will get into the presentation. [Presentation]

Yes. It's wonderful, isn't it, when you see a video actually comes to life for us, too. So that's the good part of the presentation. Now unfortunately, you got us with the dull numbers, right? But we really enjoyed making that video and presenting what we see as Grindrod. Up here with me, you know all the people. We haven't changed. Xolani you know, coming in as the CEO to take over from me at the end of the year, who has been running freight for the last few years anyway; David, who runs the bank; and Fathima, who make sure we're all honest with the numbers. And we'll go through the presentation in that order. If we first look at the overview, the environment and the highlights, and I won't steal all of the thunder from Xolani and David, but just to set the scene for this last 6-month period, yes, the COVID, as we all know, has affected all the logistics chains around the world. And then you play Russia, Ukraine on top of that. And again, everything went out of sync. And we see how the world is struggling to try and get in control of this again. I was talking earlier to people about what's happening in America with the containers backlog. I mean, in the U.S., their backlog is worse than in South Africa. So that whole system is out of sync, and it will take a long time for us to get back into sync. The markets that we've seen that have actually been a little resilient are, in fact, the minerals and agris and for good reason. And we're pleased with that from a Grindrod perspective. The higher oil price environment, which came off and it seems to be rising a little bit again, that's still going to be disturbed for a long time going forward. And of course, are we in recession or aren't we? And is it a false recession? Or is it going to be a short recession is obviously all the things that we wrestle with when we look about where we're investing money and where we're playing. And in South Africa, as you see, the commodity prices have saved us as a country. The agri will save us as a country. Ukraine and Russia are responsible for a lot of inputs in agri sector. So we are very fortunate at South Africa to be in the position we are which many countries aren't. So that's kind of the backdrop. And of course, in Durban now on our CVs, we've taken off our engineering degrees. We just put survived KZN, right? Just an aside, those containers you saw on the slide, you can't use any of our equipment to handle them because, of course, our equipment handles this way or this way, not sideways. So you need to get a crane with a cable. And then it's up 20 meters high, so you need another crane with a platform with people on to connect it. 2 weeks they took to clear that, very impressive. So that was what we had to deal with this year. And on the back of those volumes, you'll see in all -- across all our businesses, volumes up, volumes up. So a great, great job by all the teams despite the setbacks to actually enjoy the market that we're in and make sure we provide as much for the customers as we can where we thought we are full, where we find more space. And that's essentially what Xolani has been wrestling for, for the last while. We're also fortunate that our Board had the trust in us to execute on a lot of capital projects during that COVID era. So the port expansion was completed. So we're looking for that volume to come through in the future years. We've done a whole lot of work, as you saw on the video, on various facilities. And I've already talked a little bit about the flood. And of course, the most important and Xolani will touch on it again is that our people are safe. Those volumes translate then into the good numbers, and you see all the numbers up. And I guess, so the trading statement, you already saw a lot of this. But good for us to see the business coming back and strong on the revenue, making sure the costs are still under control and making sure the headline earnings is coming through and of course, using that cash flow to settle debt in all the areas that we can to make the balance sheet even stronger than it is. So we're very pleased with what the team has done, the Board with the confidence to approve all the capital that we have spent. And of course, as you know, Xolani is -- doesn't stop working on new projects. So he's got a list of them, but we try not to share those until they got to a stage where it gets the Board and the Board approves those. So a great set of results for us on the back of a very interesting global economy, where we've managed to ensure that we are agile enough to make what we can for our shareholders. So if I hand to Xolani now to take us through the detail on the freight services.

Thank you, Andrew, and good morning to everyone. We're quite pleased to have you here and spend time with us. I was just reflecting as Andrew was speaking that it's probably the last time we sit here like this. And I'll be pleased with that. And also, I can sort of feel the seat warming up a bit. I know he's -- you're in the hot seat, hopefully, it will be cooler in night, take it. What I'm going to do this morning is I'm just going to try to walk you through our operations in the main so that you get a feel of what we go through as a business. And I'm hoping that it will help you appreciate how we try to create value all the time because that's what we are about. And maybe a bit of context before I go to the script. What is happening in Mozambique is a good case. You would have seen the $110 million that's been invested. That was -- that project has been running for about 3 years. And they -- those who've been there would have seen that we upgraded the port roads. We upgraded the chrome and ferrochromes lab. We also upgraded the work on offloading facility as well as the berths. We now have 6 running berths that are proper and looking good. I'll show you some steps in terms of where we are. So that's point number one. Point number two is that because of this attractiveness of this infrastructure, I expect that the capital injection that's going to go to the country, specifically around the port, is probably going to be in the region of over $200 million in the next 2 to 3 years. That, for me, is a good case that if we can emulate it elsewhere, it can really, really unlock value for our ports in the Southern African region by and large. So that's my second point. And the third point is we have seen the challenges on the environment, which are becoming very frequent, sorry. And what was infrequent in the past has become a frequent event. Now what that does, it forces us, so it challenges us actually to say how do you then sustain your business model under those scenarios? So on the backdrop of that, I'm quite pleased that with those 3 items that I've listed upfront, we have been able to report on the numbers. But the most important aspect of it all is our employees and our customers, without whom we wouldn't be where we are on the numbers that we are putting. So back to the script now. If you look at our scorecard, this is what Andrew measures me on. And this is why I didn't go to the team and say, this is how I'm going to measure you on. First and foremost, we have to work safely. It's a nonnegotiable. It has to happen. I'm glad I've got the [indiscernible] who looks after our check this morning. We delivered a good set of stats on that. We had everyone who worked in Grindrod going home safely and alive. If you look at the intensity of our injuries, which we measure by using LTIFR, which is the lost time injury frequency rate, that improved if you look at the Port and Terminals from 0.44 last year to 0.33 this year; Logistics recorded an improvement to 0.37 from 0.51 last year. That is very commendable, and the teams are working hard potential in that we retain that. And if you look at our financial numbers, we achieved a strong revenue growth in Ports and Terminal segment on the back of strong volumes, ZAR 1.2 billion compared to ZAR 495 million last year. On the back of that, we saw EBITDA growing nicely. Headline earnings up ZAR 300 million from ZAR 111 million last year. That is good growth that the team have achieved. And if you look at the EBITDA margins, good quality revenue that we brought in, particularly on the Logistics business, where the baseline or the base revenue or the revenue base at around 1.6 billion, remain relatively the same, only up 1%. But your margins are up from 23% to 35%. This is good work done by the team. Most importantly for you shareholders and investors is that our target of 15% ROE has been exceeded. We delivered 22% ROE on Port and Terminals, and we delivered 25% on Logistics. Now of course, the numbers include some insurance proceeds, which we received on the back of events in KZN. So I'm sure some analysts will ask me and say, so what that number looks like in reality. If you adjust for the ZAR 75 million interim insurance proceeds that we have received, we're still above 20%. In fact, we're 21% on Port and Terminals and about 22% on logistics. So a good set of numbers from the team. Thank you. If you then look at the highlights, what are really key highlights that have come out in terms of our business in the first half of this year. So we are obviously pleased with the growth of 12% that Port of Maputo team have achieved. And for me, that is really, really encouraging. As I've said earlier, we have now fully commissioned 6 berths, which have been rehabilitated. We spent about $110 million upgrading the entire infrastructure. The port handled 391 vessels during the first half of this year compared to 379 vessels last year. Now that for me is quite encouraging because it means the capacity that we have added, we are now eating into it. I'm hoping that the team on the ground will start building a business case for the next expansion. Overall volumes across our own terminals as Grindrod have grown by 52% if you compare to last year. Last year, we achieved 5 million tonnes overall across all our terminals, Walvis Bay, Richards Bay, Maputo, Matola and our [indiscernible] terminal as well as [indiscernible], 52% growth. I'm actually pleased and for me, this is very important, and I must highlight it. I'm actually pleased to confirm that we have provided direct access to export market to 5 African black-owned imaging mining companies, which makes this performance really worthwhile. We will actually increase this number as the opportunities arise. If you look at our Matola, in April this year, we had an incident where the vessel hit our [indiscernible] on the quay side. And we had outage of 20 days, no loading. So if you look at the numbers, if you look at the market side, 2,500 tonnes an hour. You multiply it by number of days, it gives you the potential loss. But because we've got a dynamic team who are resilient and they know what needs to be done, the next month, we are able to deliver plus 2 million tonnes to recoup those losses. In fact, we managed to, for the full first half of this year, to deliver -- to handed 52 vessels compared to 40 last year. So that's highly commendable, and it really shows the resilience of the team. In fact, what we do, which is why the customers like us, we guarantee our performance. We put -- what they say, we put the money where our mouth is. We guarantee 25,000 tonnes of loading rate for magnetite, and we guarantee 15,000 tonnes on coal. So which means that if we don't deliver on that performance, we pick up the demerit. I can tell you that the demerit account as we stand now is clean. Now that's operational performance at its best. I said I think it was early this year that we will increase our coal terminal in Maputo. In fact, if you look at our numbers, we reflect around 1.2 million tonnes as our capacity. But we've always said that capacity is scalable temporarily. So I'm quite pleased that we are now at 4.5 million tonnes capacity in the coal terminal in the main port. That increase, we've done the investment. I think we spent over $6 million. And I did mention at the time that the payback was 0.6 months. So my commercial teams, there you are, so we have achieved that payback, done. So -- which is again the agility and nimbleness of the team. So the team now is relentlessly chasing set targets to ramp up utilization of that facility. Again, we guaranteed 10,000 tonnes of floating rate in that facility. And I'm quite pleased that we are comfortably -- actually comfortable ramped up to 300,000 tonnes per month. So if you annualize that, you get to a good number. We're not too far off from 4.5 million tonnes. So I'm quite pleased with that. And we're averaging vessels of about 6 per month. The team keeps saying they're going to go to 7, 8. I'm looking forward to that. We've also seen a healthy increase in demand for the second-hand car vehicles that are being imported into the country and some of which gets transshipped. Our volumes on the car terminal went up 30% on the back of that. Our terminal continues to benefit from project cargo handling. Some of you will recall when we had LNG project last year. Before it went off, we proved the concept that actually the car terminal can be, let's say, at best to have cargo handling. So it can actually handle project cargo as well as cargo because of its good condition. So that benefit continues to flow through. So all of this performance in terminals and port was delivered on the back of challenging operating environment. So if you do look at the volumes, the chart that it really literally looks nice. It challenges us going forward to make sure that we maintain the same trajectory. In fact, if you look at the top part from Maputo port and just look at the first halves in 2020, 2021 and 2022, the CAGR, which is compounded annual growth rate is about 25% on the port side and 22% in Matola. Again, decent set of numbers, and I commend our employees for having achieved that. So I guess the natural question is, with all of these -- and maybe before I jump into that, you will recall that when we had the facilities that we had, it took us years to get to the utilization that you require. Last year, for the first time, we did 8.2 million tonnes on the back of 7.3 million tonne capacity in Matola, which was good. If you look at these set of numbers, the run rate based on the first half of the year, we should be able to meet the target. So I guess the natural question is, where to from here in terms of the opportunities. So I've sort of tried to highlight it here. I prefer to use the colors just to indicate the level of confidence and timing, et cetera. So I have announced or we have announced Matola Drybulk Terminal expansion, which will deliver 4.7 million tonnes of -- between, coal and iron ore. We think by and large, it would be magnetite, where we are also inviting imaging mining companies to participate as my commercial team is going out and signing up customers for this additional capacity. We expect it to come through in the next 2, 2.5 years. The FEI study that's currently happening is progressing very well. I'll be looking to Board for approval in November. The rating of medium term is really an indication of the period to take to deliver the project from now onwards. Within that study, we've taken an initiative to do FEL 2 study for the additional berth. Of course, the justification of that berth in itself will be subject to various factors, including possibly looking at requesting for extension, but that's really down the line, which would be good for the country. We are fully aware of the risk associated with this additional capacity. Andrew keeps reminding me that if Richards Bay gets its house in order, there may be a risk there. So the question is, how do you mitigate that risk? And one good thing that we're doing in our study is to assure that our facility is versatile. In other words, it can be loaded both from rail as well as road because then that makes it quite viable and easy to actually lift up the utilization. The next one is Richards Bay at 1 million tonnes. Of course, that unlocking of that additional 1 million tonne of capacity is subject to our customers being able to secure the quay side. We do not control the quay side in Richards Bay, but we continue to engage appropriately to see if we can secure additional quay side for our customers. If we can get the access, it's a matter of 6 months to actually get that to 1 million tonnes unlocked. The manganese handling facility, we are increasing our presence in the Eastern Cape. Watch this space. In Doha manganese terminal PSP, I'm quite pleased that with the consortium that we set up last year, we participated in the first round of what I call mega manganese facility that's been proposed in Doha. With that consortium, we have gone on to the next stage. The challenge we faced though is that what we had hoped is that the PSP would support a private terminal operator. Unfortunately, at this stage, as you probably all know, it does not. So it's an EPC contract bid. So we are currently viewing our next step, which some of my colleagues told me there is a possibility to work on something there. So you'll see that the timing is right. It's a reflection of the fact that it actually does not, at this stage at least, support the terminal operator participation. If you look at the market outlook, what is our in-house view in terms of the commodities in which we participate. We accept that these views changes every day, as you know. Markets are dynamic. They're not static. Our in-house view on iron ore is that at the moment, it is volatile. Some of you have seen that, but we think that the long-term fundamentals remain intact. So it is the right commodity to be in. Chrome, ferrochrome, we are of the view that the fundamentals are strong going forward. On manganese, we hold the same view that the market fundamentals are strong long term. Coal short term, very strong fundamentals, long term, debatable. Our in-house view is that it's not sustainable. But there are alternative views in the market that says just transition from renewables -- sorry, from nonrenewables to renewables requires a very careful consideration. And some people are rating it at medium term to be sustainable. If you move on to the Logistics business segment, we have done really, really well on coastal shipping and container businesses. You'd have seen the expansion that we're currently working on in Denver, and we're quite pleased with that. So the floods did severely impact us, in fact, in all our depot facilities in Denver, but we resumed operation within 2 weeks as Andrew said. And in fact, the interim payouts that we got, we had already moved on. I was -- at some stage, I was a little bit nervous if the insurers were going to pay us our business interruption because everything seemed normal. I'm excited with our Denver Container Depot Park expansion. We spent ZAR 118 million on that. That to us is a very strategic project. As some of you are fully aware, we are -- we have a joint venture with Maersk, which is at an implementation phase at the moment. But we retained our capability on running a container depot facility through our subsidiary called United Container Depot. We invested in a new facility in Cape Town. We have upgraded our facility within this complex in Johannesburg. We are relentlessly looking for appropriate property in Denver where we will invest. We are engaging shipping lines because we believe that there will be -- for any container depot to work, you need a shipping line as a key underpin. Our team in conjunction with our graphite customer in Northern Mozambique have come up with a brilliant alternative to Nacala. As we know, the shortage of containers as well as restrictions on the road from Balama to Nacala means that the primary route that we currently use has got limitations, unfortunately. We then had to respond quickly to our customer needs and to provide an alternative through Palma. Very excited with that innovative thinking from our teams. Our locomotive deployment, I'm looking at my CEO, Andrew. We are seeing an improvement in our deployment rate. It's currently 46%. Last year, it was 35%. It's not quite where we want it to be, but the deployment rate is really exciting at the moment. I can tell you that 13 of those locomotives are roaming in the country, 13 of those locomotives are in Sierra Leone as we know, and 4 of those locomotives are in Namibia actually. And 2 of those will be deployed in Mozambique, which is quite exciting for us. We look forward to putting more locomotives in the country. So where are the opportunities in the Logistics segment of our business? I've talked about the joint venture with Maersk, which is progressing very well. It should be implemented imminently. This will have a profound impact in the medium term on our business. You can imagine the container volumes that come through Maersk in South Africa. As published in the market, our joint venture bid submission for container therefore for Denver container terminal PF2 are successful. So we're now moving on to the next stage. We partnered with a Hamburg-based container terminal operator, very well-established, fully automated. I had a privilege of visiting that facility. If we can do a fraction of that, if we can bring a fraction of that into our country, it would do good for us. So we moved on to the next phase, and we're quite pleased with that outcome. East Africa remains exciting for us. We are deploying teams there to look at specific projects that we've identified. Andrew has talked about a pipeline, [indiscernible] term because if you've got a pipeline, you never know which one to hit. So we've narrowed it down to 2 specific projects that we are now targeting. We're in the process of setting up various relationships in country because, as you know, we believe in local partnerships. You cannot go in the country and think you can run it on your own. You need locals to participate with you and benefit on the value creation. So we are steering ahead on that. What is the outlook -- market outlook looking like? It's all great. So we are very upbeat about the areas in which we participate in this business segment. On that note, I'd like to thank you all for listening to me.

Good morning, all. And as you have all seen, 99% of you will hope that this is the last time you see me on -- in this seat. We don't know how long the process will take in terms of the sale to African Bank. But it is all on track, and we have to obviously jump through the regulatory hurdles in terms of reserve bank approvals, Competition Commission approvals, and then finally, Finance Minister. So as I said, timing is difficult. We would hope that by the end of the year, we have it done, Andrew [indiscernible]. So this may well be the last time that I'm presenting, but I've really enjoyed the time that I've had within the group and the support that we've enjoyed from our shareholders, the group and all of you over the years. So I'll thank you in advance, just in case I'm not here. From our perspective, again, fantastic performance by Xolani and my colleagues. It really has been phenomenal. Watching it from the side when you saw what really was going on in Durban in the crisis, it was there, I think Xolani and Andrew probably underplayed it a bit. It is a phenomenal first half performance by Xolani and his team. So well done to all of you. From the bank perspective, we've got a good first half. Again, year-on-year numbers are all up from an earnings perspective, from a revenue perspective, largely on the back of higher interest rates. So we benefit from a higher interest rate environment. So that comes through on the revenue side. On the earnings side, it's a combination of both high interest rates and also lower impairments. We've kept our impairment numbers certainly below where they were last year, and we hope for that to continue through to the end of the year. So we see that the second half, hopefully mirroring what we saw in the first half. On the balance sheet front, you can see there, very stable balance sheet deposit base. One always is concerned that when you have change and particularly in a corporate action environment from a banking perspective, can you maintain your balance sheet and your -- the confidence from your deposit base. I'm delighted that we've seen the support of our depositors. And as you can see there, deposits are slightly up on comparative of last year. And from the date the announcement was made, virtually no attrition in our deposit base. So again, a very strong sign of confidence in our bank and the way we've dealt with our customers and depositors over the years. The operational highlights, I've mentioned some of them. Growth in earnings, clearly. The other aspect that is very relevant for us in this market is how do we grow our advances book. We've seen that, that is under pressure from a growth perspective, both from a pricing -- market pricing, we're seeing our competitors being quite aggressive from a pricing perspective. But also, we've seen some attrition in our book in terms of people paying back loans that they've had with us for some time, which is an indication of people de-gearing their own balance sheets, some corporate action in the market for people doing deals, particularly in the property space, selling properties and as a result, paying back loans that we were delighted to have on our books, so we have to replace those. The position for us now, obviously, we've got capacity to grow substantially off our existing balance sheet. So that is a pressure on our teams to do that over the next 6 months to a year. And then once we've used up our own capital capacity, we've got -- hopefully, the timing will coincide with when African Bank comes into the mix, and we've got commitments for significant additional capital from them when that deal is concluded. So hopefully, that, as I say, the timing coincides so that as we've exhausted our own resources, we can start using theirs. And that's the intention from our perspective. So that will take us through to the end of 2022 and probably early into 2023. So we certainly are seeing ourselves being able to go out on a high form of an exit and a -- from a [indiscernible] exit perspective. But again, just to end off, thank you all for your support and the inputs that we've had from you all over the years.

Thank you, David, and good morning to everybody. I'm certainly pleased to be able to deliver the results of the group for the first 6 months. I think as Xolani and Andrew alluded to, and certainly, some of the terminology we use internally is that it's an epic performance in light of the challenges we've been able to overcome in this period. The strong mineral market have certainly helped to position the results for the Freight Services businesses and similarly, the high interest rates in the context of the bank's performance. If we have to look a little bit further into our performance on the overall income statement, and again, I'd just highlight that this is presented on a segmental basis, which means that the effective percentage of all our JVs are included on a line-by-line basis. Our core businesses revenue up firmly at 31%, again, on the backdrop of the volume achievements that we've been able to meet in these first 6 months. And we see that translating in trading profit uplift at 37%. We believe we are a cost-conscious organization. Certainly, COVID helped us embed a lot of that into our disciplines within the business, but again, a key imperative for us so that we don't get any slippage from that perspective. Noncore revenue all attributable to the Marine Fuels business. And again, the significant increase there is attributable to the oil prices and how those have behaved in the 6 months. That revenue translated into 54 million of trading profit, and that's been offset by fair value losses presented within the private equity business on the back of fair value of the portfolio as well as recording fair value adjustments on the significant advance we have on noncost properties. Nontrading items, as you would be familiar, are essentially what we adjust for from a headline earnings positioning. And again, all that attributable to fixed asset impairments largely on the back of the floods in April. Overall, our earnings for the group up [ 191% ] on the previous period. And headline earnings moved from $4 million to $400 million, which again is approximate to a 10,000% increase. If we had to look closer at our core businesses, headline earnings delivery 53% up on prior year at $529 million. What we attempt to do on this slide really is to account for any once-off significant items so that we can present and demonstrate a bit of a normalized position. In this period, again, the focus being on the floods, as you can see from a net earnings perspective, no significant impact because we've been able to mitigate the asset impairments through getting some interim insurance proceeds. But what the accounting standards do require is that we treat the payments very different to us booking income. And of course, what that means is that headline earnings elevated by close to about 50 million. We also saw a recovery in some of the Northern Mozambique debtors book that we had impaired in the prior year. Overall, post adjustments, headline earnings up 121%. I think it's important for me to note from a group perspective, you do see that the overheads are elevated comparatively, and this is largely attributable to 2 items. The first being that we attract withholding taxes when we repatriate monies from Mozambique. And that quantified to about $29 million that's included in there. And then what we also saw is that with the elevated or the surge in the share price, we've had to book costs of $24 million linked to our cash-settled share-linked incentive schemes. On a normalized basis, that attributes to $53 million in comparison to the prior period -- prior period's $44 million. From a balance sheet perspective, I'll talk to the key moves, the investments line, you see a reduction, again, in line with our strategy. That is the private equity book, and again, our disposals bringing in proceeds of about $152 million as well as fair value losses as I mentioned earlier. Other assets comprises the amounts that were still outstanding following the disposal of our road transportation businesses last year as well as the disposal of our U.K. real estate investment. The reduction is because we've managed to collect $161 million of proceeds on the transportation businesses. And then we recorded some foreign exchange losses on the U.K.-denominated proceeds due to the [ SIA ] investment. Significant uplift in our current assets and our current liabilities on balance sheet. Current assets, essentially, our debt is up $1.1 billion and liabilities up $900 million, again, largely attributed to the improved trading. Marine Fuels accounts for essentially half of that -- of those increases, and the remainder within our Fleet Services. Big factor also is timing associated with our ships agencies and clearing and forwarding disbursements and customer collections. From a bank perspective, you'll see ZAR 1 billion uplift in liquid assets and negotiables. That, together with the bank's cash of $1 billion, effectively talks to the $6 billion surplus liquidity that David mentioned earlier. If you look at the net cash position for the group, we've moved from $450 million at the end of December to effectively $950 million now. Our activities -- our operating activities generated net cash of about $746 million. We put $249 million of that back into capital investments within the business, a big portion of that linked to our Denver container park that we would have seen in the video, and then, of course, extending our footprint within the container depot business in Cape Town as well as Durban, big investment in terminal handling equipment and of course, the locomotive refurbishment program. $387 million raised on disposal efforts. I mentioned private equity and the road transportation, and we also managed to sell a small business within one of our oil tanking JVs, which brought in about $19 million. Noncash effects in our net debt, $155 million, mostly linked to movements within our lease liabilities on balance sheet as well as the advances book. And then, of course, with us disposing of our fuel fleet in Botswana at the end of March, a lot of that debt was effectively settled directly with the banks, which would come in as noncash. If we have to look at the net -- or the legal net debt effectively excluding the bank, you'll see that we are seeing improvement on a net debt level coming through both from a reduction of debt as well as improved cash holdings. From a debt perspective, we have effectively settled all of the preferred share funding within the private equity business now. And another key important aspect within borrowings is that while it hasn't -- the aggregate of our debt hasn't moved, critical for us was to restructure that debt. And we've managed to position $400 million of that out of short term into long term. So a great effort by our treasury teams, which took them a good couple of months to achieve. Effectively, our strategy has really been around strengthening our balance sheet. And we focused on 2 key principles, looking at the businesses and getting us to elevate the returns on those as well as reducing debt. So -- and really, this is all in an effort to create capacity and capability on balance sheet to leverage off when we need to convert on the various opportunities that Xolani had talked to earlier. And I guess when we consider where we find ourselves in the context of the recessionary factors, reducing debt in the short term is probably a good idea. Capital allocation for us as a group, we are certainly not asset-light. So making sure that our businesses are able to deliver, deliver consistently, it constantly needs to have the necessary capital injections to ensure that we fit. And then we do have a lot of the greenfield and brownfield projects as well that we're looking to invest in. Certainly, we want to be able to be in a position where we can attract long-term investors, and a sustainable dividend profile is quite important from that perspective. If we had to look at how our net asset values unfold, [indiscernible] is effectively wrapped up in our core businesses. And what you can see is that we are seeing elevated returns at 17% for this period, 42% up on the prior period. And what's pleasing is that we're seeing the return elevation, both within the Fleet Services businesses as well as the bank. ZAR 3.08 is locked into the noncore businesses, and Andrew will give us some perspective on that shortly. In fact, now. Thank you.

And I wish I could stay on this slide. That's [indiscernible] states up the Northcoast, where we've lent money into -- essentially, it was the unbundling and the BEE transaction that [indiscernible] did pay back when. And we bridge funded and then ended up having to carry on as they ended up having to pay back land bank money, et cetera, et cetera. So if we talk to the noncore private equity, we've done really well. Our teams have managed to, largely with the other shareholders, negotiate exits. Obviously, during this time, it hasn't been easy. Market has not been opportune to get out of some of these investments. But we've done a really good job of getting there. So one big one left, and that's also looking quite good. On the land, lots of work being done by the teams that own the property, obviously, supported by ourselves and now pleasingly to be supported by African Bank, too, because as they take the bank, they take the loans from the bank that are directly to these land owners as well. So quite good upbeat discussions with African Bank and various parties on this land. So that's looking positive. Marine Fuels, as you know, we've felt that, that has been noncore for some time. We have not been able to attract a buyer. Luckily -- maybe not luckily, but good management, that business is making good money. So it's not hurting us. So we basically rethinks and rethinks with the shareholders and management on what to do next to that business. It's not a burn for us. So a little bit like David, we like this page to disappear in the future presentations, but there may well be some of that, that we'll have to report back on in the future. If I can then just wrap up what we had formally to present before we take the questions. I think it's important for us to understand where we are at Grindrod. Mike Hankinson, when he was Chairman with the Board, set us on a strategy to make sure we went back to our core, make sure we unbundle some businesses and get a focus on each of them. I was talking to Steve Griffiths the other day and he said to me, "Andrew, if we had kept shipping in Grindrod Limited, we probably would have sold all the ships." We unbundled that several years ago, and they had years and years of losses. But now, as you know, that business is flying or should I say steaming ahead. So -- and those of you shareholders that stood by them, you'll be very happy because if you take the share price of shipping and the share price of Grindrod Limited, we're now back at -- I think it was $23. We did the calculation for the Board yesterday. So thank you for your patience if you waited for this. And it shows that getting back to your strategy, letting go of the pieces not working for you and getting the right teams in place to focus on the right things works. So thank you for your patience and all of that. And we look forward to seeing how this freight business moves ahead. We had a refresh strategy that was put to the Board last November when Xolani was pushing forward on a whole lot of different programs, central of which is the customer focus. So we're very excited about how that will go, obviously, to Board again in November, how that process then goes forward in this new Grindrod Freight Services business that you all -- and that we all our shareholders of and very happy to serve in some way. So I think the market looks tough from a global perspective. But as I said in the beginning, we are very fortunate to be playing in 2 really good spaces of minerals and ags, where we are in demand. Even though from time to time, the Spanish don't want our citrus and the Chinese don't want our wool, at least we managed to hit above our weight. And yes, a lot of work being done in East Africa. So you'll see that coming through with Xolani in the years ahead. So very exciting times for us as Grindrod. And we look forward to, as I said before, I'll be sitting on that side, looking forward to Xolani running this business into the future with the help of Cheryl and the Board and really a pleasure to be sitting here with these set of results to present to you. So thank you for your time, and very happy to take questions from all of you. And I understand there are whole lot of people on the machine as well. So thank you.

Right. There's a question.

Simon from [indiscernible]. Is there any chance you can give us an idea as to whether there will be a controlling -- a change in controlling interest in Grindrod Shipping in the near future, i.e. in a matter of time, taking a majority in the company?

Thank you for the question. I'm probably not the person qualified to answer it. But personally, I still own Grindrod Shipping shares like I hope a lot of you all did. I don't know the answer to that. I do speak to Steve Griffiths from time to time, but he's not able to tell me. I was very interested how they took the stake in the business, but I'm not sure at all where they are and what their intentions are. I probably know as much as you do.

Can you give us a sense of how much excess capital you guys guesstimate you'll have post the sale of the bank and what you have in mind for us?

I thought that question was going to come from Brendan. So it's a question that gets asked often. And if you go back to the balance sheet and the debt, I guess that's the most relevant one. And the question is effectively talking to the net debt, excluding bank of 1.6, and then you get 1.5 of proceeds from the bank. So then we are very debt-free. So we've had lots of debates over the year with the Board, quite heated yesterday as well. And of course, if Rudy was here, he'll be talking about our lazy balance sheet, which I know I got a couple of those comments earlier. The Board have asked us to prepare a formal presentation in November addressing gearing, all those questions about debt to equity, what optimal is. Obviously, we can't run a business with no debt. It's not going to work. But we also need to think carefully about, for example, the TCM expansion that we've announced. And that can be quite serious numbers and how you introduce our capital into that before you then bring in the debt capital. Is there some bridging we should do or not? And also the timing of it because you don't want to sit with the cash for a year doing nothing, right? So that -- all of that debate is the #1 priority for the Board. And the Board hasn't made a decision so we don't have a decision as a group. But we're very conscious of it, and we know shareholders are very conscious of it. And we've got a couple of shareholders on the Board also that are very conscious of it. So I'm sure we'll do the right thing for Grindrod. I know that's not really the direct answer. Hopefully, it's enough. Thank you.

From an investment invested in your share unfortunate -- not invested in your share, unfortunately, over the past 6 months. Your large holding of land that coastal state apart from having long weekends there, are you carrying that currently at market value? Or do you expect further impairment to dispose of it? And I didn't get a clear indication of how long the piece of string is in your disposal process.

Okay. So just to be clear, the land we don't own. We have lent money to the consortium, and we've got security of the land. And we had that in the bank and in Grindrod Limited. You remember that in our process to unbundle the bank and find an owner for the bank, we had to separate out a company called GFSH, which was part of the bank, but it was a private equity holding business. So we had the loans in both those entities. And the technical IFRS explanation Fathima might have to give you, but it's a sizable piece of money lending, which is why it's been on the agenda every presentation. The valuations, as we report each year, they get done December and June, are ZAR 3 billion. But you and I know that if you sold something up the North Coast today for ZAR 3 billion, you're not -- and if you put it on an auction, you're not going to get it. So the way to realize the value is to work with those owners and various other parties, try to liquidate pieces of it as you go. And you'll know from the Tonga presentations, they also have sizable land, not quite in the same areas as us. And they've also been working on programs to liquidate land. They've done a great job now on the road to [indiscernible], where they've got land away for a good project as well. So there are a few of us, and we talk to each other so that we're not confusing the process of -- as that development goes up the North Coast. Seaton is at the moment -- Zululami and Seaton are being developed at the moment. And then we see as it progresses further north that it will start touching on our properties as well. And I shouldn't say our properties because they don't belong to us. It's our loans.

[ Rowan Golar ] from [ Chronix Research ]. Just a question on your freight business. I was down in [indiscernible] last weekend and saw how many trucks on the road coming down from [indiscernible] full of coal, chrome and everything else. And how much do you think you benefited from the -- well, maybe temporary demise of Transnet. And some tonnage, I presume, will go back to Transnet when they recover. But are you seeing customers maybe making a long-term switch to using your facilities? So just really trying to understand how much tonnage you're benefiting from Transnet's problems and how much might go back to them in the medium term potentially.

Thanks for the question. It's just tricky for me to respond to that question. Perhaps the best way to respond to it is that we've got strategic assets in the strategic areas that allows us to fulfill customer solutions. And on that basis, whatever volume comes, we will manage and handle on behalf of the customer. Thank you.

I think the trick is for me at the moment, there's too much volume. So it's almost like -- and a lot of shareholders have done this over the years, tracked our share price with what happens on the global cycle with commodities. When there's no need for commodities and the prices are back at $50, well, you're giving away -- I mean, we had that position in Matola where Xolani was pricing $5 and $4 and $3. You get squeezed because you just want any volume. So at the moment, Transnet's got more than it cater with, and we've got even more than we can cater with as well. So we're all fortunate that we going gangbusters. Well, customers, as we know, will always use port that's nearest or it's the least cost. So that will switch. Lots of people use Dar es Salaam. You saw Xolani using Pemba for the graphite. So I don't know that it's more, I think, to look at where the cycle of the commodities are rather than whether we benefit from someone else in the cycle. Is that fair? Any more questions in the room? I've got one -- I don't know. There's a couple here on -- from the people on the screen. You mentioned African Bank taking over some cases in loans. Will this be at face value or discounted? Thank you. That's Ryan from [ 36 1 ]. So essentially with African Bank buying the bank at -- the price you know is 1.5. That is just short of NAV, and they didn't share with us what they were going to do with any discounting or whatever. Those loans are in the book, and they've taken it as it is. They obviously have their own credit criteria, and maybe they'll run different criteria against it. But yes, it was carried in our books at how do you describe it?

$744 million.

$744 million and what is that carrying value less something?