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Despite South Africa slipping into a recession in 2019, which affected rail freight volumes and container traffic at the country’s ports, state 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 slightly below the 1.6% revenue growth it posted for the prior financial year, but was largely due to rate increases for port and rail users, which averaged 2.9% for its last reporting period.
The rate increases basically contribute to an increase in the cost of doing business in SA, something that the new Transnet executive team under CEO Portia Derby wants to address.
Derby was outspoken in her first major results presentation since taking the hot seat in February, saying that one of her main missions at Transnet is to reduce the cost of doing business in the country.
Portia Derby, CEO of the Transnet group. Image: supplied
While he made high-level remarks during the results presentation, Derby let Transnet’s new CFO Nonkululeko Dlamini comment on finances, which was for a period during which none of the executives were in charge.
The group has been in the midst of a reform for the past year, following disclosures of corruption and mismanagement by its previous executives, including Brian Molefe, Anoj Singh and Siyabonga Gama, among others.
With Transnet’s financial year ending on March 31, its latest results correspond to the period largely before the Covid-19 pandemic forced SA to close at the end of March.
Neither Derby nor Dlamini gave much detailed information on the financial impact of Covid-19 on Transnet, saying this would be reported in the group’s next interim results. This is likely to only be released early next year, considering the delay in releasing its full-year results, which the group said was due to Covid-19 restrictions.
Transnet noted in a statement regarding its 2019/2020 financial year, that its 1.3% increase in revenue was offset by a 1.3% decrease in rail freight volumes (to 212.4 million tons) compared to the previous year. There was a further 2.4% decrease in the port’s container throughput, to 4.4 million 20-foot equivalent unit (TEU) containers.
“The drop 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,” he said.
Despite the difficult economic environment at SA during the financial year, both Derby and Dlamini described Transnet’s results as “strong.”
Public Enterprises Minister Pravin Gordhan, meanwhile, said the results were “excellent” given the problems Transnet has faced, especially around the capture of the state and the revelations being made at the Zondo Commission.
Gordhan noted that since Transnet reported a net profit of R3.9 billion for the year, he was encouraged that it is “one of the state-owned companies where you don’t need to use words like ‘bailouts’ and ‘government guarantees.’
Despite positive sentiment about results, the slowdown in Transnet’s revenues caused net profit for the year to drop 34.9% (to R3.9 billion). Its operating costs increased by 1.9% to R41.1 billion.
Transnet reported that Ebitda (earnings before interest, taxes, depreciation and amortization) 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 made during the period, representing an increase of 3.5% over the previous year.
See full results details below (click to enlarge):
