Through the Looking Glass

In a stunning case of déjà vu, we are extremely pleased to announce our 2005 Rankings winner: Grindrod.

Consistent all-around performance is what defines a winner in a decathlon. In this instance, it enabled Grindrod to repeat as the number one company in the rankings. Here is what they did right.

Grindrod: Managing Growth

Of the six metrics measured as part of our overall performance algorithm, Grindrod placed in the top seven in five categories. It’s only failing was in profit margin, where it placed near the bottom. This is easily explained, however, by the company’s low margin bulk trading activity, which grew substantially in 2005, and the fact that a substantial portion of their fleet is chartered-in where the spreads tend to be less, particularly as the market declines. Their efficient use of assets as measured by the turnover ratio of 1.50 times led to their 24% ROA. Even with a conservative 44% debt to capitalization and the low profit margin, the company’s ROE was an astounding 62%.

The real success story is that their standing was maintained while the size of the company in terms of total assets increased by 188%, revenues increased by 250% and EBIT increased by 154% over last year. And for the icing on the cake, the credit ratios, although in the middle of the pack in terms of rankings, were a very reputable 44% debt to capitalization, 6.18 times debt coverage and a weak 1.14 current ratio reflecting the build-up of inventories for trading.

This is only an excerpt of Through the Looking Glass

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