Divisional overviews – Freight

Anthony Dawe     Bidvest Services

Anthony Dawe
Chief executive

Bidvest Freight experienced a good year, and posted a 4,9% increase in trading profit. The financial performance was supported by an uptick in mineral exports, particularly manganese, copper and chrome, and strong liquid volumes. Agricultural import volumes fell short of expectations. Excellent cost control added to profitability.

 

Contribution to
trading profit

18%

BTT volumes +10%
Agricultural volumes disappointed
SACD turned around on well-managed costs and higher volumes

Salient features

  • Volumes at Bidvest Tank Terminals (BTT) were up 10% across all products handled, despite South Africa’s slow growth environment.
  • South African Bulk Terminals (SABT) had an average year with volumes down 3% on last year. Maize availability was much better than anticipated, which led to drastically reduced import requirements. The maize export programme commenced in June 2017. Wheat volumes were lower than the previous year.
  • Successful cost-saving measures implemented in the previous financial year contributed positively in Bidfreight Port Operations’ much improved results for 2017. The ships agency business was constrained with lower volumes from Durban-based businesses resulting in some restructuring.
  • Cost pressures on customers led to some conversion to ocean freight, resulting in lower airfreight volumes, which impacted Bidvest Panalpina Logistics.
  • Bulk Connections had an exciting year with volumes up 25% on last year and for several months demand exceeded capacity necessitating highly efficient team work. Costs were well managed.
  • There was a pleasing turnaround at Bidvest South African Container Depots (SACD), supported by improved cargo volumes and well-managed costs. Export volumes continue to strengthen, up 24%.
Driving innovation

The depressed operating environment has resulted in many of our customers being under cost pressures, which had a knock-on effect on our businesses. As such, much of our focus is on ensuring a customer-centric approach, and offering innovative and value-added services and collaborations to ensure retention.

The timely and accurate flow of information to our customers is vital, which means our systems are increasingly critical. To this end we invested R42 million and completed a large ERP system implementation at BTT. The new system is now operating and benefits to our customers are being delivered.

SABT has played an important role in ensuring South Africa meets its grain import requirements, despite experiencing the severe drought. This was achieved through collaboration with role players in the grain industry. Prior planning and engagements with Transnet Freight Rail enabled a higher percentage of grain to be moved via rail.

The liquids involved in the energy sector are a growth focus and we continue to invest significantly in LPG storage and other multi-purpose tanks, primarily at Richards Bay. Total capital expenditure for Bidvest Freight during 2017 was R588 million.

Sustainable growth

Learnerships and graduate development programmes play an important role in increasing the talent pool and the employment of youth in our businesses. We continue to increase requisite skills and invested R57 million on management and supervisory development programmes, learnerships, internships, apprenticeships, graduate development programmes and bursaries for employees. The specific initiatives in place at each of our businesses will yield long-term benefits.

We spent R9 million on enterprise and supplier development. In terms of our procurement spend, some R3 billion was directed towards B-BBEE suppliers. Further opportunities are being pursued to improve the amount spent with black-owned exempt micro enterprises, and qualifying small enterprises and designated suppliers.

For us, B-BBEE goes beyond the scorecard and forms part of our strategic imperative. Our businesses have performed well and maintained a credible contributor status. A lot of work has been done to ensure that our processes and initiatives are aligned to the draft Transport Sector Codes to achieve our targeted contributor status.

We invested R8 million in corporate social investment in the period under review, almost 50% of it on education-related activities which range from funding tutorial programmes, building facilities, bursaries for our employee’s children, providing temporary classrooms to needy schools, and sports coaching. The balance of the funds was spent in health, transport and welfare and community development activities.

Going beyond

The board has approved R1 billion for a new 42 800 tonne LPG Terminal in Richards Bay for which we are in the process of obtaining various legislative approvals. We expect to commission the project in 2020. We are collaborating with key stakeholders to identify opportunities for further investments in increasing capacity and providing port infrastructure. Plans to invest in new chemical storage facilities in Durban are under way, and the Environmental Impact Assessment has been granted.

The depressed economy brings about consolidation opportunities for which we are well positioned. Current systems are being reviewed to take advantage of technological changes, and we have increased our efforts to offer value-added services to retain customers.

We continue to engage the government on private sector participation opportunities and as a key industry player, we are well placed to take advantage when these are implemented.

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