Covid leaves Transnet with R3bn loss

Transnet has hit its first half-year headline loss in the wake of the Covid-19 economic crunch.

The group swung to a headline loss of R3 billion for the six months ending September 2020, compared to a R2.9 billion headline profit for its 2019 interim period, according to its latest results which were published on Friday.

Transnet saw a significant impact in its business, with the global Covid-19 pandemic and tougher government-instituted initial lockdown measures designed to curb the spread of the virus resulting in a major drop in freight rail and port volumes.

Freight rail experienced a 16.4% drop in volumes, while port container volumes plunged 20.7%. The freight rail business accounts for around 60% of the group’s revenue, while ports are the second largest contributor, at around 35% of revenue.

Transnet, which also operates fuel pipelines that largely run from Durban to Gauteng, saw pipeline volumes plummet 38%. However, this is a comparatively small part of its business.

The group’s overall half-year revenue fell 17.3% to R32 billion (2019: R38.7 billion).

Earnings before interest, tax, depreciation, and amortisation (Ebitda) plunged almost 44% to R9.8 billion (2019: R17.5 billion). However, the group noted that its costs are “largely fi xed” with staff costs accounting for about 59% of its operating costs.

“Transnet’s half-year results are on back of the South African economy suffering a significant contraction during April, May and June of 2020, when the country operated under lockdown restrictions,” it noted in a Sens statement on the JSE.

“Transnet continues to be a cash generative business with R12.6 billion cash generated from operations after working capital changes.”

Capital expenditure was down 37.5%, to R4.9 billion. Most of this went into maintaining the assets.

The group noted in a separate media statement that the closure of construction sites and disruptions in procurement supply chains during Level 5 lockdown was the reason behind the decline in capex and maintenance.

According to Transnet’s halfyear results presentation, its “total comprehensive loss” comes to R5.57 billion. This was largely on the back of devaluations and actuarial losses on “post-retirement benefit obligations”.