State-owned freight and logistics group Transnet is back in the black, according to its latest interim results, but it has warned it is battling myriad challenges including load-shedding, vandalism, fuel and cable theft, bottlenecks and locomotive shortages.
The company reported a profit of R159m in its half-year to end-September from a loss of R78m a year ago. However, headline earnings, a profit measure that strips out impairments and one-off items, more than halved year on year to R254m.
“The outlook for the second half of the year is clouded by severe load-shedding, higher domestic inflation, rising interest rates and dynamic economic conditions,” Transnet said in its outlook.
This follows a tough reporting period in which Transnet had to deal with the devastating flood in KwaZulu-Natal in April, which affected the Durban and Richards Bay harbours. The effect of the strike in October, which led to some segments of Transnet declaring force majeure — a clause in contracts that excuses an entity from fulfilling its obligations in the event of a natural or unavoidable catastrophe — will be known only when the company reports its final results for the year.
“The recent labour strike action has muddied the waters of potential recovery for the next six months,” the company said.
The floods, which claimed more than 460 lives, hampered Transnet’s operations, leading to a fall in rail volumes that resulted in lower revenue and core earnings, the company said.
Rail volumes fell 9.2% and those of general freight were down 15.4%.
Transnet Freight Rail — the biggest segment by core earnings — saw these drop by just over one-quarter to R4.58bn. In terms of revenue from contracts with customers, transporting iron ore and manganese brought in the bulk of sales (43.12%), followed by coal at 31.2%.
The fall can be attributed partially to a wider trend of companies opting to move their goods via road instead of rail due to bottlenecks and other problems at Transnet. This move has, however, led to the further degradation of SA’s roads.
In October, Minerals Council SA CEO Roger Baxter said the problems at Transnet are as “serious as the electricity crisis” for local mining companies.
According to Stats SA’s Stats in Brief 2022, published earlier this month, freight moved by rail fell 13.74% to 178,795 tonnes from 2012 to 2021, while that moved by road rose 23.2% during the same period to 688,846 tonnes.
This trend continued in 2022, according to Stats SA’s October land transport survey, with a further drop in freight transport by rail while that by road had already surpassed what was moved in 2021.
Transnet’s revenue rose 2% to R36.1bn for the six months, while earnings before interest, tax, depreciation and amortisation (ebitda), or core earnings, fell 2.5% to R12.9bn.
Transnet’s latest results come amid global economic uncertainty, partly because of the war in Ukraine pushing up inflation, which has led to central banks, including the SA Reserve Bank, hiking interest rates.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.