Transnet is moving in right direction again
Transnet has quite rightly highlighted the signing of its manganese rail contracts at public events, occasions that in the past took place behind closed doors.
The signing of the 10 contracts lasting until October 2023 entails moving 15.1-million tonnes of manganese to the coast. It shows the rail utility is moving in the right direction. It is a tripling of capacity since 2012, when Transnet moved five-million tonnes. It was achieved for about R2.9bn, a tenth of the R29bn price tag to raise capacity to 16-million tonnes.
Leadership at Transnet ’ s freight rail division is entitled to feel proud of this achievement as it puts the past behind it and dodgy senior appointments are unravelled. There ’ s a new customer-focused drive spearheaded by logistics veteran Mike Fanucchi, as chief customer officer at the freight division.
He is no political or cadre deployment, but a skilled individual tackling correcting ills of the past at Transnet and fixing relationships with key bulk commodity clients and those in the vehicle-manufacturing sector, for example. While there may be some legacy appointments at Transnet still working for their own agendas, there is a new broom sweeping out those people as the new administration painstakingly puts the interests of the country first.
Consider the comment from Fanucchi at the signing of the 10th and final manganese rail contract with Kalagadi Manganese on Tuesday. Transnet achieved 15-million tonnes of capacity at a fraction of planned cost, keeping railed-manganese tariffs as low as possible and ensuring SA stays competitive.
Imagine the benefits to the economy if more state-owned enterprises could think in terms of what is best for the country — instead of serving harmful political ideologies, deploying cadres lacking in skills to senior roles and feathering the nests of politically connected individuals and companies as in the case of Jacob Zuma ’ s presidency.
Feed and poultry company Quantum, unbundled from Pioneer Foods in 2014, has again lamented the undesirable combination of falling egg prices and rising feed costs.
In the six months to March 31, egg prices fell 14.1%. And according to a trading update on Monday, the trend is set to continue for the rest of 2019. This is a huge reversal of fortunes as in financial 2018 the egg business performed strongly, thanks largely to avian influenza substantially lifting egg prices.
But focusing on the company ’ s discomfort with the highly cyclical profitability of the egg business and unfavourable trends in the feed business can lead to an underestimation of the underlying value in the stock.
As analyst Anthony Clark noted on Tuesday, the profit contribution of the egg business is volatile unlike more sustainable revenue and profit from broiler rearing, chicks and animal nutrition.
Quantum is SA ’ s largest egg producer and sells its product under the Nulaid brand. In the 2018 financial year, the company sold 847-million eggs and related products in SA.
Despite the obvious challenges with the egg price and feed costs, there are factors that work in the company ’ s favour.
With no material debt on its balance sheet, the company ’ s cash generation capabilities are strong. It has the leeway to pursue organic and acquisitive growth.