Transnet ‘at pinnacle of investment in South Africa’ as profits rise

Out-Law News | 01 Jul 2014 | 3:42 pm | 1 min. read

South Africa's state-owned freight transport and logistics group Transnet has announced a rise in annual profit of nearly 25% as it moves into the fourth of a seven-year investment programme to expand the country’s railways, ports and pipelines.

In full-year results for 2013 (27-page / 1.03 MB PDF), the company said profit increased to 5.2 billion rand (ZAR) ($469 million) while capital investment increased by 15.6% to an “unprecedented” ZAR 31.8bn ($3bn), “cementing Transnet’s place at the pinnacle of South Africa’s infrastructure investment drive”.

Transnet said total investment since 2010 has reached “a record-breaking” ZAR 121.5bn ($11bn), with the majority of investment directed to freight rail.

According to the results, earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 12.3% in 2013 to ZAR 23.6bn ($2.2bn), compared to ZAR 21.1bn ($1.9bn) in 2012.

Over the past financial year, Transnet said it had raised ZAR 22.4bn ($2.1bn) from the market and repaid ZAR 8bn ($751m). Funds were raised from several sources including a domestic bond issue of ZAR 5.8bn ($563m) and ZAR 1.1bn ($94m) from the Export-Import Bank of the United States.

Transnet said its fund-raising strategy was in line with policies (36-page / 9.56 MB PDF) set by the company’s board based on “diversifying sources of funding”. Transnet said: “By the end of the year, the company’s gearing ratio stood at 45.9%, reflecting ongoing capacity to raise funding for the infrastructure investment programme, and comfortably within the self-imposed ceiling of 50%.”

Transnet said funds were raised “on the strength of its financial position without government guarantees”, with only 4% of total borrowings guaranteed, which were issued before 2000.

Earlier this year, Transnet awarded a ZAR 50bn ($4.7bn) locomotive supply contract to Chinese and South African firms, which the company said was the biggest such contract in the country’s history.

Transnet group chief executive Brian Molefe said the transaction would “transform the South African rail industry by growing existing small businesses and creating new ones”, creating and preserving about 30,000 jobs.

Transnet’s freight demand forecast (14-page / 1.50 MB PDF), published in 2013, projected that freight handled in South Africa would grow from 789 million tonnes per annum (mtpa) to 2,157 mtpa by 2042, with mining and minerals comprising the largest components of the growth over the period.

The forecast said Transnet’s target is to increase rail volumes in tonnes per kilometre of total rail-addressable freight from 46% to 71% in 30 years, in line with a national initiative to switch more freight transport from roads to rail.

The African Development Bank’s ‘Results-based Country Strategy Paper for South Africa’ (34-page / 384 KB PDF) for 2008-2012 said major investment plans by state-owned enterprises such as Transnet presented opportunities for further involvement by the private sector in supporting greater investment in the nation’s infrastructure.