Business risks

Risks are little changed, though some recent events have underlined key challenges. For example, Bidvest Freight was reminded of its reliance on Transnet during the Transnet strike.

Transnet’s ability to set the industry agenda and redefine industry cost structures was also showcased. Recent pay awards to Transnet workers will doubtless raise expectations across the industry.

Transnet is both our competitor and our landlord. It creates a unique challenge when a competitor can also influence your costs. Bidvest Freight and Transnet have managed these issues in a businesslike fashion for years and recent renegotiation of our leases confirms that mutually acceptable solutions can be found.

Credit risk affects all business and a return to no or low economic growth heightened the problem. Bidvest Freight’s main customers are major corporates. Their ability to meet their commitments is in little doubt.

Bidvest Freight’s operations are hazardous by their very nature. The risk is managed by constant vigilance, continual training in safety procedures and ongoing investment in equipment and modern facilities.

People risk is integral to all businesses that depend on dedicated, experienced staff. We operate in Africa and the entire continent suffers from a continual haemorrhage of managerial, engineering and specialist skills. We respond through formal training, on-the-job training and special interventions such as cadet management programmes.

Sustainable development

Our culture contributes to talent retention. Our staff take pride in their performance and their membership of teams that set the industry standard for efficiency and delivery.

Economic performance – Bidfreight Port Operations and SACS have joined Bidfreight Intermodal as level 2 contributors under the DTI Codes. Others are at level 3 or 4, with the exception of Manica Africa and Ensimbini Terminals where the focus is to achieve a minimum of level 4.

Environment – Electricity and fuel consumption are the main contributors to our carbon footprint. The trend to replace rail with road transport continues to present challenges in the form of damage to infrastructure and increased fuel usage, but we are working with port and transport stakeholders to find solutions. Bulk Connections was awarded the “Best Environmental Protection Award” by the International Bulk Journals, recognising work over several years. Bidvest Freight continues to focus on the management of dust levels.

Human resources – Recessionary pressures resulted in 97 people being retrenched from Safcor Panalpina. Training focused on literacy, lifeskills and supervisory management skills, an area in critical demand in our industry. Safcor Panalpina and Rennies Distribution Services have training academies on site, enabling the businesses to customise training to their needs.

Health and safety – Though we have active health and safety committees and safety personnel are employed to improve awareness and prevention, Bidvest Freight regrettably suffered two fatalities and the death of one casual labourer. We are proactive in tackling HIV/Aids, offering training and VCT programmes. We distribute ARVs, immune boosters and vitamins at no cost to employees. Expenditure on these programmes rose by 77%.

Labour disputes – CCMA cases brought against Bidvest Freight dropped 14% to 32, with 26 findings in favour of the division. No Department of Labour fines were incurred for non-compliance.

Society – Internal audit manages various aspects of ethical business conduct, including whistle-blowing, gifts register, fraud, corruption and anti-trust behaviour. Due procedure is set for all significant incidents, including the involvement of the South African Police Services. One serious incident was encountered at Manica Africa’s Durban operation. Investigations are underway in conjunction with the SAPS.

Corporate social investment – Individual businesses conduct their own programmes serving the needs of communities affected by the company, with a focus on education and HIV/Aids.

Future

High levels of manganese and coal exports confirm that demand from newly industrialised India and China is strong and can be expected to continue for some time. Growth rates in the rest of the world are somewhat lower, but appear to be improving.

South African consumers remain under pressure, but recovery seems to be under way, suggesting that consumer demand will gradually revive.

Our capacity has been expanded while staffing structures have been streamlined. Bidvest Freight is therefore well positioned to benefit from any increase in world trade and in commodity imports and exports.

The non-financial targets are largely unchanged. We want to achieve zero fatalities and our industry’s lowest accident rates while positioning ourselves as the employer and supplier of choice.

BULK CONNECTIONS

The business achieved very good trading profit on the back of extremely high capacity utilisation and strong demand for coal and manganese. Rail services were sometimes unpredictable, resulting in growing reliance on road transport.

Renegotiation of the lease and subsequent investment will permit the business to store and handle a wider range of commodities while recent expansion of facilities will enable our teams to process even higher volumes. Congestion in an around the Durban terminal may, however, constrain the rate of growth.

ISLAND VIEW STORAGE

Demand for liquid bulk storage moved higher and IVS performed well, achieving a record trading profit after a strong second-half performance. The new Richards Bay tanks were commissioned, adding to capacity from the third quarter. The fire control system at the Isando facility is being upgraded.

Demand for storage services for chemicals, gases, fats, oils and additives is expected to remain high as the economy recovers. IVS is well placed to benefit, given recent expansion.

BIDFREIGHT PORT OPERATIONS

BPO recorded a very pleasing result. Higher levels of steel and forest products exports and bulk imports underpinned growth, aided by improved earnings from stevedoring, warehousing and transport operations. The new bulk fertiliser business performed well, more than offsetting lower food imports.

RENNIES DISTRIBUTION SERVICES

Implementation of last year’s turnaround strategy continued. Despite the challenging retail environment, a leaner RDS team secured improved revenue by growing volumes from existing customers while winning new business. Costs were strictly controlled, contributing to a significant increase in trading profit.

SACD FREIGHT

Depressed demand for consumer and automotive products resulted in a difficult year. Both trading profit and revenue were below last year. New capacity came on- stream in Johannesburg and Cape Town. Mineral volumes through Johannesburg showed strong growth in the second half.

SOUTH AFRICAN BULK TERMINALS

Strong revenue streams and strict control of costs helped the business to record levels of profitability. Capacity utilisation was driven by strong wheat imports while a bumper crop resulted in buoyant maize exports in the fourth quarter. Rice volumes were also strong, though they tapered off toward year-end.

NAVAL

Trading conditions remain challenging. Trading profit rose significantly, though foreign exchange gains contributed strongly to the overall result. Performance was driven by coal-handling work and new business gains, relating primarily to the handling and containerisation of chrome ore. Tallying revenue increased off the back of increased container volumes.

SAFCOR PANALPINA

Volumes fell dramatically, leading to a major retrenchment programme in the second quarter. Cost control remained a critical area of focus for management. Revenue and trading profit were well below expectation, though stability and a measure of improvement were evident towards year-end.

MARINE SERVICES

The business performed exceptionally well in challenging circumstances. A major customer was lost at the beginning of the year. Expense control and cash flow management were stepped up. Port Operations and P & I Associates had a great year. Rennie Murray was under pressure as work in the automotive industry fell away.

MANICA AFRICA

Results were disappointing. The business was impacted by a reduction in aid cargoes into Africa, inconsistent cargo flows from the DRC, the closure of copper mines in Zambia and continuing political and financial challenges in Zimbabwe and Malawi.