Transnet released its unaudited interim results for the six months to 30 September 2024 on Tuesday.
Transnet’s half-year results show that it increased its income in the first half of last year, but also had a bigger loss that wiped out any gains. Its issues with security and infrastructure continues to slow down its recovery three years after starting to implement its latest turnaround plan.
According to a Transnet statement, its revenue increased by 6.0% from R39.2 billion to R41.5 billion, while its earnings before interest, taxes, depreciation and amortisation (EBITDA) decreased by 1.6% from R13.8 billion to R13.6 billion.
However, the loss for the period was R2.2 billion compared to a loss of R1.6 billion in 2023. Cash generated from operations after working capital changes increased by 5.4% to R13.8 billion, while capital investment to sustain and expand operations was R10.5 billion and debt service of R13.1 billion was paid in capital repayments and interest.
Transnet says in the statement that there was a noticeable improvement in sentiment regarding South Africa’s economic outlook. The company is of critical importance for the country’s imports and exports.
ALSO READ: New Transnet CEO confident on meeting recovery plan targets
Improvements in operations, but decrease in container volumes
According to the statement, Transnet 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 its recovery plan.
“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 group posted a loss of R2.2 billion,” Transnet says.
Revenue increased by 6.0% to R41.5 billion (2023: R39.2 billion), in line with weighted average tariff increases in the rail, port and pipeline businesses and a 3.2% increase in rail volumes which was partially offset by lower container and petroleum volumes.
Container volumes decreased mainly due to market challenges, equipment availability and adverse weather conditions. Petroleum volumes decreased due to low market demand and challenges experienced after the planned refinery shutdown.
However, Transnet also says, the positive operational volumes achieved at Freight Rail were affected by various operational challenges, including security related incidents, rolling stock unavailability and the condition of rail infrastructure.
ALSO READ: Transnet needs R51 billion to restore rail and infrastructure network
Operating expenses increased, but some progress Transnet says
The company’s net operating expenses increased by 10.2% to R27.9 billion (2023: R25.3 billion) mainly due to increased personnel costs, security incidents, fuel and electricity tariff increases and maintenance and material cost increases, mainly for locomotives and wagons.
Earnings before interest, tax, depreciation and amortisation decreased by 1.6% to R13.6 billion (2023: R13.8 billion) with a resultant decrease in the EBITDA margin to 32.8% (2023: 35.3%). Net finance costs increased by 7.9% to R7.1 billion (2023: R6.6 billion) primarily due to interest rate hikes and an increase in total debt compared to the prior period.
About its prospects Transnet says it made progress with early successes in stabilising operations, improving financial performance and addressing infrastructure challenges. “While significant work remains, particularly in areas including debt management and security, the ongoing reforms and leadership stability provide a strong foundation for continued recovery and long-term sustainability.”
Transnet says it remains committed to its role in supporting South Africa’s economic recovery and is focused on delivering efficient, world-class logistics services for the benefit of the country.
According to the statement Transnet’s progress is in line with its recovery plan but operational challenges are impeding the clear progress made in revenue and cash generation from operations after working capital changes.
“The board and management will remain focused on the implementation of the recovery plan and direct significant focus on resolving operational challenges to ensure that the tangible gains made thus far are translated into sustainable profitability.”
ALSO READ: Transnet next in line for privatisation push? Third party access to be finalised soon
Transnet prioritises rolling stock and rail infrastructure
Transnet plans to prioritise projects focused on improving rolling stock availability and the condition of its rail infrastructure while building on improved efficiencies and customer projects that helped to improve volume performance on the general freight business and export coal lines.
The replenishment of Transnet’s key port equipment in the short- and medium-term, as well as the acquisition of critical spares to support the maintenance teams remain a key focus area across all terminals and will go a long way to sustain efficient and improved performance at the ports, Transnet says.
The department of transport as well as National Treasury are monitoring the progress of the recovery plan and the Guarantee Framework Conditions.
According to the statement from Transnet it continues to implement cost control measures, along with better planning and execution of maintenance, employee training and incentives to support improved operational delivery.
“Transnet is working closely with government in the transformation of the logistics sector and the initiatives will support the long-term sustainability of the business.”
