Transnet’s profits fall sharply on economic derailing
Transnet’s interim profits have fallen sharply on the back of the weak economy and higher finance costs.
The state-owned entity whose infrastructure provides a backbone to the industrial economy through its operation of ports, railways and pipelines reported growth in revenue of 1.3% for the six months ending September.
The company attributed the pedestrian revenue growth to the economy entering a technical recession in the second quarter of the year (which corresponded to the first half of the current financial year), which led to transported volumes across many of its businesses declining.
Profits fell sharply by 15% to R2.84bn compared to the same period a year ago as higher depreciation and finance charges hit the bottom line. Net finance costs rose by about R1bn as the company was forced to access more expensive loan funding to support its capital investment programme as opposed to tapping the local bond market.
The organisation contained operating expenses to an increase of just 0.8%.
Against the country’s poor economic backdrop, Transnet says it has embarked on “a course of resolute action to rid the company of all malfeasance and to stabilise the organisation by restoring its integrity”.
In November Transnet appointed Tau Morwe as acting group chief executive following the firing of Siyabonga Gama. His axing came after investigations found that he, former CEO Brian Molefe and Gupta associates may have acted unlawfully in relation to the purchase of 1,064 locomotives for R54bn.
The company announced this week that it had written down the value of its rail and port facilities by R14.5bn. The adjustment for the port facilities (-R8.3bn) was due to the company receiving a lower tariff increase than had been applied for. No reasons were given why the carrying value of the rail infrastructure was reduced.
Reflecting the economy’s poor state, Transnet’s Freight Rail division posted marginally higher revenues only because it was able to pass on a 5% increase in revenue per ton. Volumes decreased by 4% over the prior comparative period.
Volumes were relatively flat across lines at the Port Terminals division, but the company saw a nearly 10% rise in the volume of petroleum piped through its pipeline division.
The company reduced capital expenditure by 10% over the period to R8.1bn.