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Johannesburg - Transport parastatal Transnet on Thursday reported a 9.2% increase to R14.4bn in top-line profits (Ebidta) for the year ended March 31 2010 despite the negative impact of the global economic downturn on demand for commodities, containers and freight
volumes and an adverse effect of a tariff decision by Nersa.
However, the state-owned bulk freight transport and logistics company's bottom line profits were 37% lower at R3.1bn.
Revenue rose 6% to R35.6bn during the year compared to the prior year.
The group attributed the 9.2% increase in earnings before interest taxation depreciation and amortisation (Ebitda) to an aggressive cost-
cutting drive which yielded a R1.9bn saving and focus on operational efficiencies. As a result, the Ebitda margin improved marginally to 40.5% from 39.3%.
Revenue was generally impacted by lower volumes caused by the economic downturn. Specifically, revenue was impacted negatively by an 8% decrease in general freight business (GFB) volumes compared to the previous year, the disappointing performance of the export coal line which was virtually unchanged at 61.8mt and the 4.5% drop in container volumes. The GFB was offset by a 6% gain in market share for containers on rail. The export iron ore line, between the Port in Saldanha and the mines in Sishen, increased volumes to record levels of 44.7mt in line with customer commitments.
Cash generated from operations increased by 21.7% to R16.4bn, demonstrating Transnet’s ability to generate sustainable, strong and predictable cash flows. The focus on better working capital management is paying off as evidenced by a cash inflow of R3.8bn which increased cash generated by operations, after working capital changes to R17.6bn – an increase of 61.9%.
The cash interest cover, an important indicator of the ability of a company to repay its debts, increased to 4.5 times (2009: 4 times) – which is significantly better than the required level of 3 times.
“We are pleased with the financial performance of the business as reflected in the full-year results especially in light of the recessionary
conditions we experienced during the year. They show the efficacy of the financial strategy. They also vindicate management’s effort over the years in strengthening the financial position of the Company. We are particularly heartened by the increase in cash from operations,” says acting Group Chief Executive Chris Wells.
During the period, Transnet raised R20bn including R6bn as part of a pre-funding strategy. The pre-funding is a buffer, approved by the Board is intended to mitigate the possible impact of the global liquidity risks caused by the recent economic crisis.
Gearing, the ratio of debt to equity, increased in line with expectations to 38.5% as the Company continues to implement its funding strategy in support of the execution of the R93.4bn investment programme.
Wells says: “The current gearing level is still way below the ceiling of 50% agreed with the Shareholder and the market, and demonstrates the significant capacity for Transnet in the future to raise funding cost-effectively in the debt capital markets as we roll out the investment programme. However, we are confident that the 50% ceiling will not be breached in the medium term.
“And, going forward, the commercial paper programme and long-term bonds, which are part of our domestic medium term note (DMTN) programme, will continue to be the main sources of funding, although of course, in keeping with our strategy to diversify sources, we will also increasingly tap new sources such as the export credit agency, development finance institutions and international bonds under our GMTN programme.”
In line with its proactive strategy of dealing with the recession, Transnet decided to reprioritise some of the projects in the rolling five-
year capital investment programme resulting in a 4.4% decrease to R18.4bn capital expenditure for the year. However, all priority
projects were executed.
In keeping with Transnet’s commitment to invest in its infrastructure and to creating capacity ahead of demand, the company invested R8.7bn on sustaining and upgrading existing infrastructure and R9.7bn on expansion.
Commenting on the performance for the year, acting chair, Geoff Everingham, said: “These solid results are very impressive given the
economic environment in which the Company had to operate. This was exacerbated by the lack of regulatory clarity which hurt our regulated divisions (TPL and TNPA). The focus on efficiencies and cost containment was key to this result, and should continue with the Quantum Leap initiatives. The repositioning of the Company’s pension funds is continuing to yield the desired results. Transnet’s two defined benefit funds – the Transnet Second Defined Benefit Fund and the Transnet Sub-Fund of the Transport Pension Fund – are fully funded with actuarial surpluses of R3.2bn and R1.7bn respectively.
"In addition, the Company has again set aside R40m for an ex gratia bonus payment to those pensioners with long service but low pensions and to the previously disadvantaged pensioners of the TSDBF. This bonus, which will be paid out to approximately 14 000 of the 78 000 TSDBF members, brings the total spent by Transnet on bonus payments to R265m over the past three years.
- I-Net Bridge
volumes and an adverse effect of a tariff decision by Nersa.
However, the state-owned bulk freight transport and logistics company's bottom line profits were 37% lower at R3.1bn.
Revenue rose 6% to R35.6bn during the year compared to the prior year.
The group attributed the 9.2% increase in earnings before interest taxation depreciation and amortisation (Ebitda) to an aggressive cost-
cutting drive which yielded a R1.9bn saving and focus on operational efficiencies. As a result, the Ebitda margin improved marginally to 40.5% from 39.3%.
Revenue was generally impacted by lower volumes caused by the economic downturn. Specifically, revenue was impacted negatively by an 8% decrease in general freight business (GFB) volumes compared to the previous year, the disappointing performance of the export coal line which was virtually unchanged at 61.8mt and the 4.5% drop in container volumes. The GFB was offset by a 6% gain in market share for containers on rail. The export iron ore line, between the Port in Saldanha and the mines in Sishen, increased volumes to record levels of 44.7mt in line with customer commitments.
Cash generated from operations increased by 21.7% to R16.4bn, demonstrating Transnet’s ability to generate sustainable, strong and predictable cash flows. The focus on better working capital management is paying off as evidenced by a cash inflow of R3.8bn which increased cash generated by operations, after working capital changes to R17.6bn – an increase of 61.9%.
The cash interest cover, an important indicator of the ability of a company to repay its debts, increased to 4.5 times (2009: 4 times) – which is significantly better than the required level of 3 times.
“We are pleased with the financial performance of the business as reflected in the full-year results especially in light of the recessionary
conditions we experienced during the year. They show the efficacy of the financial strategy. They also vindicate management’s effort over the years in strengthening the financial position of the Company. We are particularly heartened by the increase in cash from operations,” says acting Group Chief Executive Chris Wells.
During the period, Transnet raised R20bn including R6bn as part of a pre-funding strategy. The pre-funding is a buffer, approved by the Board is intended to mitigate the possible impact of the global liquidity risks caused by the recent economic crisis.
Gearing, the ratio of debt to equity, increased in line with expectations to 38.5% as the Company continues to implement its funding strategy in support of the execution of the R93.4bn investment programme.
Wells says: “The current gearing level is still way below the ceiling of 50% agreed with the Shareholder and the market, and demonstrates the significant capacity for Transnet in the future to raise funding cost-effectively in the debt capital markets as we roll out the investment programme. However, we are confident that the 50% ceiling will not be breached in the medium term.
“And, going forward, the commercial paper programme and long-term bonds, which are part of our domestic medium term note (DMTN) programme, will continue to be the main sources of funding, although of course, in keeping with our strategy to diversify sources, we will also increasingly tap new sources such as the export credit agency, development finance institutions and international bonds under our GMTN programme.”
In line with its proactive strategy of dealing with the recession, Transnet decided to reprioritise some of the projects in the rolling five-
year capital investment programme resulting in a 4.4% decrease to R18.4bn capital expenditure for the year. However, all priority
projects were executed.
In keeping with Transnet’s commitment to invest in its infrastructure and to creating capacity ahead of demand, the company invested R8.7bn on sustaining and upgrading existing infrastructure and R9.7bn on expansion.
Commenting on the performance for the year, acting chair, Geoff Everingham, said: “These solid results are very impressive given the
economic environment in which the Company had to operate. This was exacerbated by the lack of regulatory clarity which hurt our regulated divisions (TPL and TNPA). The focus on efficiencies and cost containment was key to this result, and should continue with the Quantum Leap initiatives. The repositioning of the Company’s pension funds is continuing to yield the desired results. Transnet’s two defined benefit funds – the Transnet Second Defined Benefit Fund and the Transnet Sub-Fund of the Transport Pension Fund – are fully funded with actuarial surpluses of R3.2bn and R1.7bn respectively.
"In addition, the Company has again set aside R40m for an ex gratia bonus payment to those pensioners with long service but low pensions and to the previously disadvantaged pensioners of the TSDBF. This bonus, which will be paid out to approximately 14 000 of the 78 000 TSDBF members, brings the total spent by Transnet on bonus payments to R265m over the past three years.
- I-Net Bridge
