Transnet interim results as bad as expected…

Transnet’s interim results were as bad as expected, with the state-owned entity posting a loss of R1.5 billion after making a profit of R159 million during the same period in 2022, despite a notable increase in income.

According to Transnet’s interim results released recently for the six months ending on 30 September, the entity’s income increased by 8.6% to R39,2 billion thanks to a tariff increases for rail, pipelines and ports.

Transnet results: Various operational challenges

Lower operational volumes especially at Freight Rail, were affected by various operational challenges that included collisions and community unrest on the coal line, equipment challenges on the ore line, derailments, Eskom power outages affecting all lines, as well as customer challenges on the coal and general freight business lines.

Petroleum volumes decreased mainly due to a refinery shutdown in the first quarter of the interim period, while container volumes decreased due mainly to market and adverse weather conditions.

Transnet’s net operating expenses increased by 9.5% to R25,3 billion, mainly due to increased staff expenses that include salary increases, electricity tariff increases, rail and pipeline security and material costs.

Earnings before interest, tax, depreciation and amortisation increased by 7.0% to R13,8 billion, while depreciation, derecognition and amortisation of assets increased by 17.8% to R8,9 billion, mainly due to the revaluation of port facilities and pipelines in March 2023 and capital expenditure.

Various operational challenges that included cable theft and difficulty to source parts for trains and port equipment, caused the volumes Transnet handled to decrease. Rail volume decreased by 7.2%, while pipeline volume decreased by 7.2% and container volumes by 1.8%.

ALSO READ: How to fix Transnet’s ports in the interest of economic growth

Crisis at Transnet ports a focus point

There has been a crisis at Transnet’s ports recently with delays to offload ships because port equipment does not work, causing delays in deliveries.

One of the focus areas in Transnet’s turn-around strategy is to improve the availability and dependability of critical equipment, especially at its ports.

Turnaround plan

According to the board, it is monitoring the implementation of the turnaround plan.

Although the Auditor-General has expressed material concern if Transnet is still a going concern, the Transnet board believes that the turn-around plans Transnet started to implement recently are bearing fruit and that the group can continue as a going concern for the foreseeable future (15 months).

The board says Transnet has been experiencing operational challenges which negatively affected its performance for the interim period and that it did not generate sufficient cash from operations due to these challenges, leaving Transnet unable to pay its debts.

R47bn guarantee

Government provided a R47 billion guarantee for Transnet to raise additional funding to settle its current obligations, fund operations and the required capital expenditure. National Treasury is still in the process of finalising the guarantee framework conditions.

However, the board believes the risks will be addressed satisfactorily with the mitigation strategies in place.

The board considered the progress of the recovery plan and the financial support from government and expects that Transnet will continue to have access to adequate resources and facilities to operate and fund the capital investment programme for the foreseeable future as a going concern.