A depressed commodities market continued to take its toll on shipping and logistics group Grindrod in the six months ended June 30.

Grindrod on Thursday reported a drop in revenue to R11-billion in its management income statement – which included the company’s share in joint ventures – compared with R14.4-billion in the comparable period last year. The loss attributable to ordinary shareholders was R1.1-billion, compared with a profit of R303-million.

Speaking in Johannesburg, Grindrod CEO Alan Olivier described the six months under review as “extremely difficult”.

He said the R1.1-billion loss was also driven by a R675-million impairment in the group’s rail business.

He noted that Grindrod was exiting the locomotive assembly sector.

There was currently no demand in this “very cyclical market”.

“We are negotiating contracts, but the customers on the other side are not committing. Strategically there is no reason for us to be in the assembly business.

“We had interest from a number of parties to buy the business.”

Grindrod’s locomotive business largely targets customers in the mining, industrial and transport sectors in Africa.

Olivier said Grindrod would continue with its rail operations and leasing business.

At its ports and terminals division – located within the Freight Services business – Grindrod saw poor volumes in the first half of the year. However, the group’s Matola coal and magnetite terminal and Richards Bay coal terminal were now fully contracted, albeit at lower margins.

The big challenge was to ensure efficient train services from Transnet to serve these customers, said Olivier.

Maputo car terminal volumes dropped from 17 063 units in the first half of 2015, to 8 879 units.

Yearly capacity at the car terminal is 120 000 vehicles.

Grindrod had initiated a number of test-runs with BMW South Africa (SA) to increase volumes through the terminal, said Olivier.

BMW SA has a production plant in Pretoria, producing the 3 Series for local and export markets.

Olivier added that Grindrod would attempt to reduce its dependency on mineral commodities within its Freight Services business by looking to liquids and grain in order to have a more diversified revenue flow.

Within the shipping business, Grindrod saw tanker rates ease towards June.

Rates in the dry-bulk sector recovered somewhat in the six-month period, but remained below profitable levels.

Olivier said this market had been assisted by commodity prices inching upwards.

He said it appeared as if China had stopped consuming its own low-grade commodities, such as coal, in the first half of the year, in favour of importing higher-grade, more environment-friendly commodities.

Olivier did not expect Grindrod’s dry-bulk fleet to return to profitability in 2016 or 2017.

Looking at the group’s capital projects, Olivier said the regulatory hold-up, relating to tariffs, at the Coega liquid-bulk terminal development had finally been resolved.

The build-own-operate-transfer agreement was ready for signing.

“We are about ready to go.”

Dredging at the Maputo port was around 40% completed. The Matola terminal berth deepening project started in July.

These two projects would allow bigger ships to enter the Maputo harbour.

Grindrod has also acquired the majority stake in an intermodal facility in Nacala, in northern Mozambique, with the aim of developing an integrated logistics project.

This project was under way, said Olivier.