Despite South Africa falling into recession in 2019, which hit rail freight volumes and container traffic at the country’s ports, state-owned logistics giant Transnet on Friday reported a 1.3% increase in revenue to R75.1 billion and a net profit of R3.9 billion for its financial year to the end of March 2020.
This was marginally below the revenue growth of 1.6% it posted for the previous financial year, but it came largely from tariff increases for port and rail users, which averaged 2.9% for its latest reporting period.
The tariff increases basically contribute to an increase in the cost of doing business in SA, something that Transnet’s new executive team under CEO Portia Derby want to address.
Derby was frank in her first major results presentation since taking the hot seat in February, saying that one of her core missions at Transnet is to bring down the cost of doing business in the country.
While she gave high level comments during the results presentation, Derby left it to Transnet’s new CFO Nonkululeko Dlamini to comment on the financials, which was for a period during which neither executive was in charge.
The group has been in the midst of an overhaul over the past year, following revelations of corruption and mismanagement under its previous executives include Brian Molefe, Anoj Singh and Siyabonga Gama, among others.
With Transnet’s financial year ending on March 31, its latest results are for the period largely before the Covid-19 pandemic forced SA to go into lockdown in late March.
Neither Derby nor Dlamini gave much detailed information on the financial impact of Covid-19 on Transnet, saying this would be reported on in the group’s forthcoming interim results. This is likely to only come out early next year, considering the delay in the release of its full-year results, which the group said was due to Covid-19 restrictions.
Transnet noted in a statement on its 2019/2020 financial year, that its 1.3% revenue increase was offset by a decline of 1.3% in rail freight volumes (to 212.4 million tons) compared with the prior year. There was a bigger decline of 2.4% in port container throughput, to 4.4 million 20-foot equivalent unit (TEU) containers.
“The decline in rail freight volumes was mainly due to deteriorating economic conditions and low demand in many market segments, particularly in the construction and manufacturing industries,” it said.
Despite the challenging economic environment in SA during the financial year, both Derby and Dlamini described Transnet’s results as “solid”.
Public Enterprises Minister Pravin Gordhan, meanwhile, said that the results were “excellent” given the issues Transnet has faced, especially around state-capture and the revelations being made at the Zondo Commission.
Gordhan noted that given Transnet reporting a net profit of R3.9 billion for the year, he was heartened that it is “one of the state-owned enterprises where words like ‘bailouts’ and ‘government guarantees’ don’t need to be used”.
Despite the positive sentiments on the results, Transnet’s slowing revenues saw net profit for the year plunge 34.9% (to R3.9 billion). Its operating costs increased by 1.9% to R41.1 billion.
Transnet reported Ebitda (earnings before interest, taxes, depreciation and amortisation) increased by 0.7% to R34 billion for the year, while cash generated from operations increased by 2.1% to R35.9 billion. Capital investments of R18.6 billion were undertaken during the period, representing a 3.5% increase on the prior year.
See results details in full below (click to enlarge):