‘We’re on the right track’ – Transnet boss Michelle Phillips

Transnet Group CEO Michelle Phillips says “we are on the right track” when asked about the group’s turnaround, even though the state-owned ports, rail and fuel pipelines company still reported losses for its latest financial year to the end of March 2024.

The group released its results on Monday, posting a loss of R7.3 billion – although around R4.8 billion of this relates to a post-FY 2024 year-end provision linked to a Natref court case involving Sasol and TotalEnergies, following a June ruling around overcharging in Transnet’s pipelines business.

Phillips said the issue goes back over a decade, with the case first instituted back in 2013. She added that had it not been for the court ruling post Transnet’s year-end, the group would have reported a loss of around R2.5 billion.

This would have meant the group slashed its losses for FY 2024 by over half, compared to its loss of R5.7 billion for FY 2023.

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Transnet was ordered to pay over R6 billion in damages, plus interest, to Sasol (and R2 billion to TotalEnergies), following a high court ruling on 18 June. The group however said after assessment of the judgment, it “has decided to appeal against the judgment on various grounds”.

At a results briefing on Monday, Phillips said discussion around a possible settlement is on the cards and that Transnet had to make financial provisions in its FY 2024 results since the court ruling came before the group could release its annual results.

“We had to make provisions for this. We have provided for this claim an amount of around R4.7 billion … But there are talks between the plaintiff and Transnet to see how we can settle this matter,” she said.

Phillips and Transnet Group CFO Nosipho Maphumulo pointed out that the provision relating to the case saw the group’s opex (operating expenses) increase by around R4.7 billion, and is reflected in the higher opex in the Transnet Pipelines business.

“The opex number was impacted by the provision of around R4.7 billion … Without the provision, Transnet Pipelines is still a profitable business and doing well. This is despite the business unit being affected by declines in fuel [volumes] being transported [mainly due to the closure of oil refineries near the Durban Port],” said Phillips.

Maphumulo stressed that Transnet Group’s overall “loss of over R7 billion for FY 2024 is not a comparable number” in relation to the prior year due to the provisions made linked to the high court case.

She said Transnet’s overall revenue increased by around 12%, to R76.7 billion for FY 2024, on the back of increased volumes in both its rail and port operations.

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“This is a good result … Transnet’s overall gearing stands at 46.2.%, which is below our covenants [with banks] … We also got an unqualified audit opinion from the Auditor-General, which is great, but it did not come easily,” said Maphumulo.

ALSO READ: ‘Not out of the woods yet’: Transnet says phase 2 of recovery plan is underway

“This [Transnet] is a cash generative business – it delivered 30% more cash in FY 2024 … At the end of the day, cash is a big measure in terms of performance of the business,” she added.

Both Maphumulo and Phillips said Transnet is targeting a return to profitability in FY 2025, but this is premised on support from the private sector.

Andile Sangqu, Transnet’s board chair, said collaboration with the private sector and other stakeholders is critical for the success of the group’s recovery plan.

He added that Transnet’s financial losses would have been lower if the company was not “distracted by legacy issues” related to the state capture years.

This article was republished from Moneyweb. Read the original here.