Transnet has seen its interim loss widen to R2.2bn despite an increase in revenue and improved volumes in its rail business.
Revenue increased by 6% to R41.5bn for the struggling state-owned freight rail and port operator in the six months to end-September. This was in line with weighted average tariff increases in the rail, port and pipeline businesses, and a 3.2% increase in rail volumes that was partially offset by lower container and petroleum volumes.
“The company continues to experience marginal improvements in the operating environment, particularly the increase in revenue and improved volumes in the rail business owing to the implementation of the recovery plan,” Transnet said in a note to investors on Tuesday.
“These improvements were achieved amid various operational challenges that continue to restrain the overall financial performance of the group despite the improved revenue and rail volume performance.”
The challenges described saw net operating expenses increasing 10.2% to R27.9bn, due mainly to increased personnel costs, security incidents, fuel and electricity tariff increases, maintenance and “material cost increases” that were mostly attributed to locomotives and wagons.
As a result, earnings before interest, tax, depreciation and amortisation (ebitda) fell 1.6% to R13.6bn. Overall, the business posted a loss of R2.2bn, compared to R1.6bn at the same point last year.
According to Transnet, container volumes were lower due mainly to market challenges, equipment availability and adverse weather conditions.
“Petroleum volumes decreased due to low market demand and challenges experienced post the planned refinery shutdown. The positive operational volumes achieved at freight rail were however affected by various operational challenges, including security related incidents, rolling stock unavailability and the condition of rail infrastructure.”
Cash generated from operations after working capital changes increased by 5.4% to R13.8bn, while gearing now sits at 48%.
Freight rail reported that projects focused on improving rolling stock availability and the rail infrastructure condition would be prioritised while “building on improved efficiencies and customer projects that have aided improved volume performance on the general freight business and export coal lines”, Transnet said.
“The replenishment of key port equipment in the short- and medium-term as well as the acquisition of critical spares to support the maintenance teams is a key focus area across all terminals and will go a long way to sustain efficient and improved performance at the ports.
“The department of transport and the National Treasury are both monitoring the progress of the recovery plan and the guarantee framework conditions.”
This comes a few weeks after Transnet National Ports Authority (TNPA) announced FFS Tank Terminals would operate the liquid bulk terminal at the Port of Cape Town over the next 25 years, having chosen the company as the preferred bidder to run the terminal, as the state-owned entity ramps up private participation at SA’s ports.
Earlier this year, the Cape Town and Durban ports were ranked among the 10 worst performers globally, with the former ranked the lowest of the 405 ports surveyed by the World Bank.
Transnet has however refuted the methodology used for the rankings but nonetheless hopes bringing in private partners will help improve efficiencies.
The biggest private sector participation across SA’s port network, in Durban, has been delayed by a legal challenge launched by the losing bidder.
In early December global consulting firm McKinsey agreed to pay $122m (R2.3bn) to resolve criminal accusations tied to state capture, including the bribing of Eskom and Transnet officials in exchange for lucrative tenders. The agreement resolved both a US investigation and charges brought against the consultancy by SA’s National Prosecuting Authority.
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