Revaluation gains on properties at its ports and pipelines helped Transnet to narrow its net loss to R1.9bn for the year to end-March but it failed to turn to profit as it had hoped a year ago, with its rail and port operations showing only patchy improvement.
The state-owned logistics group’s annual financial statements show it cut almost R1.8bn from its net losses with the revaluations at the national port authority and Transnet pipelines.
Even without this piece of accounting the group would still have managed to halve its losses compared with the previous year’s R7.3bn, on improved revenues and operating profit.
The outcome is not the R1bn profit that CEO Michelle Phillips said last September that Transnet could achieve as it sold off billions of rand worth of noncore houses and other properties.
It was a year in which Transnet made great strides towards opening up its rail network to private operators, as well as improving collaboration with its private sector customers to fix its rail and port infrastructure.
This helped to stabilise its ailing operations but it is still behind the targets set in its two-year old recovery plan. Tonnages on its rail network edged up by 5.5% to 160.1-million tonnes (mt), less than the 170mt originally hoped for and still well behind the 226mt peak of 2017/18.
Derailments and locomotive failures were the biggest reasons for lost volumes, along with cable theft, the group said.
Automotive volumes through the ports were up by 4.1% but container volumes at its port terminals declined by 2% to just more than 4-million twenty foot equivalent units (TEUs), and pipeline volumes dropped almost 10% on weak demand.
The group’s debt rose to R144.8bn at end-March, from R137.7bn a year earlier. The increase “supported the tactical recovery plan and enabled the company to address critical infrastructure maintenance and service delivery needs”, the group said.
It lifted its capital spending by 44% to R24bn during the year. More than two thirds of this was on rail, with ports accounting for a further 27%, while 85% of the capex was for infrastructure replacement, in line with Transnet’s maintenance strategy, rather than expansion.
Transport minister Barbara Creecy recently agreed with the Treasury on an additional R94bn of guarantees for Transnet, enabling it to meet all its obligations and allaying ratings agency concerns about its liquidity position.
The new guarantees bring the total envelope to more than R140bn. But the financials show just how stretched financially Transnet still is, with net finance costs of R14.7bn consuming almost two thirds of the cash it generated from operations.
Earnings before interest tax and depreciation increased by almost 40% to R30.6bn, on a 7.8% increase in revenue and an almost 5% decrease in net operating costs, thanks mainly to the fact that the group did not have to provide as it did in the previous year for claims against it by the Natref refinery.
During the year Transnet settled two big lawsuits relating to this, with Sasol and Total, though the impact will only come through in this 2026 financial year.
The group said on Friday that the narrower net loss had brought it closer to its goal of long-term profitability, thanks to its strategic initiatives and steps to address operational challenges. It would now shift focus from operational recovery to transformation and long term, sustainable growth, Transnet said.
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