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| Review of operations – Bidfreight continued |
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| The future |
We anticipate a continuation of South Africa’s GDP growth in the 5,0% range and believe the economic climate will remain favourable. We see no sign of abatement in the world demand for minerals from South Africa and neighbouring countries, providing a strong underpin to export activities. Economic reform is under way in many African states, leading to increased investment and growth in cross-border trade. This is positive for our businesses inside Africa.
Indications are that grain volumes have recovered strongly. The adverse agricultural cycle appears to be behind us and further growth in volumes can be expected in 2008.
Higher interest rates may put a brake on South African consumer spending, affecting the level of imports in some categories. Container traffic reached record levels in 2007 and this rate of growth may moderate somewhat, but no sudden reversal of the “container flood” is foreseen. Automotive imports have shown signs of slowing. However, government’s strategy of infrastructure-led growth should ensure strong inflows in many other categories, with Bidfreight businesses well placed to benefit.
The import of petroleum products and export of chemicals continues at high levels, creating higher demand for liquid storage facilities. Add to this the pace of South Africa’s economic growth and it is clear that there are exciting opportunities for expansion.
Bidfreight’s capital expenditure growth is expected to continue in 2008. The short-term focus will be on efficiency gains and working smarter with the facilities we have. Consequently, we expect an improvement in the return on funds employed.
Through efficiency, full utilisation of our resources and the development of smart solutions for our customers – underpinned by continued economic growth – we believe profits will continue to grow.
We are confident about national prospects in the mid and long term. Expenditure on national infrastructure will not be curtailed after the 2010 Soccer World Cup. Government infrastructure planning looks out to 2014 at least while on-the-ground experience over the last two years indicates that substantial and sustained investment will be necessary to address capacity constraints. These factors are all positive for trade and for Bidfreight. |
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| Bulk Connections |
The strategy of increasing the range of non-coal commodities is paying off at Bulk Connections, our bulk mineral terminal in Durban. The result was another year of strong growth. Manganese ore exports added significantly to the volumes at the Durban terminal.
Further opportunities to widen the range of commodities are being explored, with focus on cement, fertiliser and ores. Improved margins will be sought by examining the possibility of providing add-on services such as bagging, screening, crushing and container loading.
New investment is planned in Durban to increase concrete storage facilities. Though negotiations with the National Ports Authority are at an advanced stage, lease conditions have yet to be finalised at the Durban terminal. |
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| Island View Storage |
Demand at Island View Storage, South Africa’s foremost independent liquid storage provider, remained high, resulting in strong growth in both turnover and profit.
Demand is particularly strong from customers in the petroleum industry, but capacity constraints in Durban have limited our growth. There is an urgent need to add capacity in Durban and we are pursuing additional land to build more capacity. In the interim, the principal challenge is to achieve continual efficiencies and sweat the assets.
In Richards Bay, where we have land available, new tanks were constructed for chemical exports and low pressure gas imports.
Growth in revenue and trading profit is anticipated from all operations in 2008. |
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Bidfreight continues to invest in improving environmental and health and safety performance. It is with great regret that we report that there was one fatality aboard a vessel being stevedored. International safety consultants Du Pont were brought in to support further improvement in operational safety standards. |
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| Bidfreight Port Operations |
Bidfreight Port Operations, a specialist in providing warehousing and quayside services, was affected by a reduction in steel exports. This reduction was caused by a redirection of steel to meet growth in domestic consumption.
Management reacted by reducing costs and increasing the stevedoring of bulk and containerised cargoes in the Cape. This enabled us to maintain profitability.
The container stevedoring operation which we perform for Transnet showed continued growth. |
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Management will focus on diversification from steel and paper handling and the pursuit of opportunities for growth in areas such as bulk container packing. Safety on older vessels is becoming a concern and external consultants have been used to reinforce safe working practices. |
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| Rennies Distribution Services |
Rennies Distribution Services, the national supply chain and logistics specialist, faced high levels of competitive pressure, particularly in the metals, automotive and paper divisions. Strong performances were evident in the transport and chemical divisions. Opportunities for further growth in these markets will be pursued.
Warehouses throughout South Africa remain the strength of this business and optimising the utilisation of these assets will result in profitability growth. |
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