The performance of state-owned port, freight rail and logistics group Transnet’s commodity transport business deteriorated in the June quarter.
The company was plagued by logistical challenges on its freight lines, which resulted in significant lost profits for commodity producers unable to get their product to ports for export.
Group revenue for the quarter was 13.8% below budget and 4.7% less than that of the previous matching period. Group earnings before interest, tax, depreciation and amortisation (ebidta) were 18.3% below budget and 5.5% lower than in the prior year period.
Treasury officials led by chief director of sectoral oversight Ravesh Rajlal reported on the first-quarter results of state-owned enterprises at a meeting of parliament’s appropriations committee.
“Transnet’s overall performance for the period has deteriorated in all the critical commodity segments and business flows [and did not achieve] the targets set in the 2023/24 corporate plan,” the Treasury said. “Rail volumes for the period were 18.2% behind the target due to commodities not meeting their budgeted targets (export coal line, iron ore, the manganese, chrome and magnetite). Container volumes handled by the ports were 2.2% lower than budget, and pipeline volumes 25% below budget.”
The Treasury put the drop in Transnet Freight Rail’s performance down to security concerns; failure and undersupply of locomotives; power failures at the mines; vandalism and community disputes and operational inefficiency.
“The underperformance in ports is a result of operational inefficiencies, which are at times exacerbated by adverse weather conditions resulting in critical equipment breakdowns.” The pipeline division’s underperformance was due to the shutdown of the Natref refinery and a lower export allocation.
Meanwhile, state-owned national carrier SAA lost R150m in the first quarter of the year to end-June on revenue of R1.1bn. This was against a budgeted loss of R182m on budgeted revenue of R1.4bn. The airline is in the process of being sold off to the Takatso consortium.
SAA and its subsidiaries Air Chefs and Mango, which is in business rescue, reported losses while SAA Technical reported a profit of R4.4m.
The Treasury said the lower-than-budgeted revenue was due to the lower average load factor in the first quarter of 60% for domestic travel and 49% for regional travel. In June SAA cancelled flights due to aircraft maintenance and no spare aircraft available.
The SA Post Office (Sapo), now in business rescue, generated revenue for the quarter of R482.8m, which was R86m (15%) below budget and R145.5m (15%) below the matching period of the previous year. Its net loss for the quarter was R367.3m versus a projected R610.5m net loss, lower than the prior year’s net loss of R608.4m
“Despite Sapo performing better than budget, it is primarily due to below budget expenses for the quarter and not due to improved revenue generation. The cost-to-income ratio for the quarter was 199.7% indicating (its) unsustainable cost structure.” The Treasury cited branch closures, load-shedding and suppliers suspending their services due to nonpayment as the reasons for the underperformance. Operating expenses for the quarter amount to R964m which is R329.4m (25%) below budget and a year-on-year decrease of R385.6m (29%).
“While operating costs are reducing due to stringent cost containment measures being implemented by Sapo, it continues to exceed revenue with staff costs being the main contributor to the high operating expenses,” said the Treasury.
Arms manufacturer Denel’s performance was worse than expected owing mainly to lower-than-expected revenue while costs remained relatively constant. At end-June its realised net loss was R206m, which was 11.6% worse than the projected R182m loss.
Eskom reported an unaudited first quarter loss before tax of R5bn. Net revenue grew to R70.9bn (June 2022: R66.3bn), driven largely by a regulatory standard tariff increase of 18.65% for the utility’s direct customers from April 1. Eskom’s gross debt securities and borrowings came to R453,5bn at end-June.
The Land Bank, which remains in default and has still not reached a settlement with creditors, recorded a profit of R135m against a budgeted loss of R80m and a prior year loss of R92m for the quarter. The Treasury said that this was mainly due to higher net impairment charges of R170m, up R210m from the prior year’s R40m release of impairments. Net interest income amounted to R101m.
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