South Africa’s Transnet reported an increase of 1,3% to R75,1 billion in revenue, supported by the weighted average tariff increase of 2,9%.
The revenue increase was offset by a decline of 1,3% in rail freight volumes to 212,4 million tons, and a volume decrease of 2,4% in port container throughput to 4,4 million twenty-foot equivalent units (TEUs)), compared to the prior year.
The decline in rail freight volumes was mainly due to deteriorating economic conditions and low demand in many market segments, particularly in the construction and manufacturing industries. Rail volumes were further affected by poor operational performance because of power supply challenges and poor rail network conditions on certain key corridors due to maintenance backlogs, increased security incidents and adverse weather patterns.
The container throughput performance was impacted by operational challenges owing to ageing equipment in a number of port terminals across the port network as well as inclement weather. Transnet Port Terminals (TPT) has invested R2,5 billion in the period under review for the acquisition and maintenance of port equipment.
It is anticipated that that the deployment of the new port equipment will result in operational improvements.
Transnet’s net operating costs increased by 1,9% to R41,1 billion, with personnel and energy costs increasing by 1,7% and 4,8% respectively. Numerous cost-optimisation initiatives implemented throughout the company aided cost-containment, resulting in a R4,7 billion saving against planned costs.
These initiatives included rationalising overtime, reducing professional and consulting fees; rolling out programmes to measure the execution of condition-assessment versus time-based maintenance; and limiting discretionary costs relating to travel, printing, stationery and telecommunications.
Financial position and funding perspective
As at 31 March 2020, the company’s cash-generated from operations increased by 2,1% to R35,9 billion. A well-defined funding strategy enabled Transnet to raise funding of R10,4 billion (excluding the impact of lease liabilities and deferred interest) through the issuance of bonds and commercial paper (under the Domestic Medium-Term Note (DMTN) programme), and the execution of bilateral loans without the provision of Government guarantees.
The funding needs until the end of calendar year 2021 are largely catered for. Transnet’s gearing ratio increased to 47,6%, but is still within Transnet’s target range of less than 50% and within the triggers in loan covenants. Transnet recorded R4,3 billion in total cash and cash equivalents at the end of the financial year and a cash interest cover of 2,9 times which is within loan covenant requirements.
Capital investment for 2019/20 increased by 3,5% to R18,6 billion. A total of R3,6 billion was spent on capacity expansion, while R15,0 billion was spent to maintain capacity. Transnet Freight Rail and Transnet Engineering continued their build programme, with a total of 400 wagons manufactured and delivered, representing an investment of R528 million for the financial year. Other infrastructure investment highlights for the financial year include:
• R3,0 billion invested in rail infrastructure
• R6,8 billion invested to maintain the condition of rolling stock
• R501 million invested in the wagon fleet renewal and modernisation programme
• R788 million for the construction of the new tippler in Saldanha and all the related bulk
electric power supply
• R489 million invested in the manganese project mainly for the acquisition of land from
Coega Developmental Corporation
• R303 million invested towards the upgrade of yards, lines and electrical equipment under
the coal line investment programmes
• R187 million invested in the roads, port entrance and other services for the Tank farm in
the Port of Nqgura
• Approximately R2,5 billion invested in the acquisition and maintenance of port equipment
and infrastructure, including cranes, helicopters, tugs, dredgers and straddle carries; and
• A R333 million investment in the pipeline networks.