Transnet plans to spend R229.2bn

The Star Early Edition - - BUSINESS REPORT - Sandile Mchunu

STATE-OWNED freight and lo­gis­tics com­pany Transnet has said that it planned to in­vest R229.2 bil­lion in the next seven years to di­ver­sify its rev­enue streams.

Transnet group chief ex­ec­u­tive Siyabonga Gama an­nounced this in Jo­han­nes­burg yes­ter­day when he pre­sented the com­pany’s fi­nan­cial re­sults for the year to the end of March. He said the in­vest­ment would in­clude R20bn ear­marked for merg­ers and ac­qui­si­tions.

“The 10-year ex­pec­ta­tion, de­pen­dent on val­i­dated de­mand, is cap­i­tal ex­pen­di­ture of be­tween R340bn and R380bn,” Gama said. The group said it had ac­quired lo­co­mo­tives to mod­ernise its fleet in ex­pec­ta­tion that freight vol­umes would in­crease in com­ing years.

It con­cluded con­tracts in 2014 that re­sulted in the ac­qui­si­tion of about 1 319 lo­co­mo­tives for the gen­eral freight and coal busi­ness over the mar­ket de­mand strat­egy pe­riod.

Gama said the com­pany wanted the ac­qui­si­tion of the lo­co­mo­tives probed by the board.

He said they had ap­pointed law firm Werks­mans At­tor­neys to in­ves­ti­gate whether Transnet was over­charged for the lo­co­mo­tives or whether the firm fol­lowed its own pro­ce­dures and ex­am­ined com­pa­ra­ble pric­ing. Gama said the process would take up to three months to com­plete.

Transnet is among the sta­te­owned en­ti­ties at the cen­tre of al­le­ga­tions of state cap­ture.

Eco­nomic Free­dom Fighters pres­i­dent Julius Malema has claimed that up to R17bn was lost in a cor­rupt deal in­volv­ing the pro­cure­ment of 1 064 lo­co­mo­tives.

Transnet re­ported a profit R2.8bn for the pe­riod, up from R393 mil­lion in 2016.

Rev­enue in­creased 5.3 per­cent to R65.5bn, from R62.2bn, fu­elled by a 4.9 per­cent in­crease in gen­eral freight to 88.1 mil­lion tons, a 2.4 per­cent in­crease in ex­port coal vol­umes to 73.8 mil­lion tons, and a 24.3 per­cent in­crease in au­to­mo­tive and con­tainer vol­umes on rail to 9.2 mil­lion tons.

The group’s port con­tain­ers in­creased only 0.7 per­cent be­cause of weak con­sumer de­mand, while au­to­mo­tive ex­port vol­umes rose 3 per­cent.

“Man­age­ment continued to proac­tively man­age costs through lim­it­ing over­time, re­duc­ing pro­fes­sional and con­sult­ing fees, and im­pos­ing a limit on dis­cre­tionary costs. This re­sulted in a R2.4bn sav­ing in planned costs,” Gama said.

It said its key mea­sure of prof­itabil­ity – earn­ings be­fore in­ter­est, tax­a­tion, de­pre­ci­a­tion and amor­ti­sa­tion – in­creased 5 per­cent to R27.6bn, up from R26.3bn.

Cash gen­er­ated from oper­a­tions af­ter work­ing cap­i­tal changes rose 16.4 per­cent to R32.8bn, up from R28.2bn a year be­fore. The group said this re­flected its strong cash-gen­er­at­ing ca­pa­bil­ity.

Credit rat­ing

In April, Stan­dard & Poor’s Global Rat­ings re­vised the com­pany’s for­eign cur­rency rat­ing from BBB– to BB+ and its lo­cal cur­rency rat­ing from BBB to BBB–, both with a neg­a­tive out­look.

“This fol­lowed a sim­i­lar ac­tion on the sovereign, as Transnet is viewed to be closely linked to the gov­ern­ment. S&P’s, how­ever, main­tained Transnet’s stand-alone credit pro­file at BBB, re­flect­ing the com­pany’s strong fi­nan­cial met­rics as the com­pany ex­e­cutes its multi-bil­lion-rand in­fras­truc­ture in­vest­ment pro­gramme,” Gama said.

Gama said Transnet had eval­u­ated the po­ten­tial im­pact of the credit rat­ings down­grade on its fi­nan­cial po­si­tion, liq­uid­ity and sol­vency and ex­pected no neg­a­tive ef­fects as the prob­a­bil­ity had al­ready been fac­tored into its oper­a­tions.

He said that, for the year ahead, man­age­ment has adopted a new busi­ness model, called Transnet 4.0, which was de­signed to rein­vent the com­pany’s op­er­a­tional phi­los­o­phy to in­clude ex­pan­sion into the rest of Africa, the Mid­dle East and south Asia.

“The aim is to grow into a fully in­te­grated lo­gis­tics ser­vice provider with in­te­grated solutions and to strengthen man­u­fac­tur­ing ca­pa­bil­ity, while po­si­tion­ing Transnet as an orig­i­nal equip­ment man­u­fac­turer in Africa,” Gama said.

PHOTO: ITUMELENG ENGLISH

Transnet chief ex­ec­u­tive of­fi­cer Siyabonga Gama, right, an­nounces the com­pany’s fi­nan­cial re­sults for the year to the end of March in Kemp­ton Park yes­ter­day. On the left is the com­pany’s chief fi­nan­cial of­fi­cer, Garry Pita.

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