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BITRA - Unaudited and Unreviewed Consolidated Financial Results for the six moths ended 30 September 2024
Transnet SOC Limited
(Incorporated in the Republic of South Africa)
(Registration Number: 1990/000900/30)
Issuer Bond Code: BITRA
("Transnet", "the Company" or the "Issuer")
UNAUDITED CONSOLIDATED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2024
In terms of section 6.7 of the JSE Debt & Specialist Securities Listings Requirements, noteholders
are advised that the Issuer's unaudited condensed consolidated financial results for the six
months ended 30 September 2024, are available on the Issuer's website:
https://www.transnet.net/InvestorRelations/Pages/Interim-2024.aspx
Salient features:
• Revenue increased by 6,0% from R39,2 billion to R41,5 billion
• EBITDA decreased by 1,6% from R13,8 billion to R13,6 billion
• The loss for the period is R2,2 billion compared to a loss of R1,6 billion in 2023
• Cash generated from operations after working capital changes increased by 5,4% to
R13,8 billion
• Gearing is at 48,0%
• Rolling cash interest cover (including working capital changes) is 1,9 times
• Capital investment to sustain and expand operations is R10,5 billion
• Debt service of R13,1 billion in capital repayments and interest paid
The current reporting period has seen a noticeable improvement in sentiment regarding South
Africa's economic outlook.
The Company continues to experience marginal improvements in the operating environment,
particularly the increase in revenue and improved volumes in the rail business owing to the
implementation of the recovery plan. These improvements were achieved amid various
operational challenges that continue to restrain the overall financial performance of the Group.
Despite the improved revenue and rail volume performance, the Group posted a loss of R2,2
billion for the interim period.
Revenue for the period increased by 6,0% to R41,5 billion (2023: R39,2 billion), in line with
weighted average tariff increases in the rail, port and pipeline businesses, and a 3,2% increase
in rail volumes which was partially offset by lower container and petroleum volumes. Container
volumes decreased due mainly to market challenges, equipment availability and adverse weather
conditions. Petroleum volumes decreased due to low market demand and challenges experienced
post the planned refinery shutdown. The positive operational volumes achieved at Freight Rail
were however, impacted by various operational challenges, including security related incidents,
rolling stock unavailability and the condition of rail infrastructure.
Net operating expenses increased by 10,2% to R27,9 billion (2023: R25,3 billion) due mainly to
increased personnel costs, security incidents, fuel and electricity tariff increases, maintenance
and material cost increases (mainly for locomotives and wagons).
Earnings before interest, tax, depreciation and amortisation (EBITDA) decreased by 1,6% to
R13,6 billion (2023: R13,8 billion) with a resultant decrease in the EBITDA margin to 32,8%
(2023: 35,3%).
Net finance costs increased by 7,9% to R7,1 billion (2023: R6,6 billion) due mainly to interest
rate hikes and increase in total debt compared to the prior period. The South African Reserve
Bank, however, lowered interest rates by 0,25% on 19 September 2024, its first-rate relief since
the pandemic in 2020.
As a result, the Group reported a R2,2 billion loss for the period ended 30 September 2024.
Material uncertainties related to going concern
The consolidated interim results are prepared on a going concern basis. After performing a
detailed assessment and considering all associated risks, the directors believe that material
uncertainties relating to events or conditions which may cast significant doubt on the entity's
ability to continue as a going concern exist, but these are adequately mitigated. The Board
strongly believes that these associated risks will be satisfactorily addressed with the mitigation
strategies in place. The directors will continue to manage and implement mitigation strategies as
a priority as it is important that they materialise as envisaged.
The directors, after carefully considering the progress in the implementation of the recovery plan
and the financial support from government through the provision of guarantees, still believe that
the Group will continue to have access to adequate resources and facilities to maintain its
operations and fund the capital investment programme for the foreseeable future as a going
concern. Therefore, they continue to adopt the going concern assumption in preparing the
consolidated interim results of Transnet SOC Ltd.
Restatements
Restatements to the prior period financial results were made in accordance with those disclosed
in the 31 March 2024 annual financial statements as detailed in note 39, updated if applicable to
30 September 2023.
Events after reporting date
Cash interest cover (CIC) loan covenant breach
For the 30 September 2024 reporting period, Transnet achieved a CIC of 1,9 times.
A number of loans require Transnet to maintain the CIC loan covenant at a minimum of
2,5 and 2,0 times at 31 March and 30 September of each financial year. The current CIC
level constitutes a breach of the CIC loan covenant on loans at 2,5 times with a total
capital balance of R27,0 billion and loans at 2,0 times with a total capital balance of
R15,0 billion. The breach is an event of default.
Transnet submitted waiver requests to each of the affected lenders requesting that they waive
the triggered event of default. The waiver process has been completed and Transnet has received
all the required waivers from the affected lenders.
Rating review update
On 9 October 2024, Moody's Ratings completed a review update of Transnet's ratings. The
corporate family rating and baseline credit assessment were confirmed and remained unchanged
at Ba3 and b3, respectively. The negative outlook also remained unchanged.
On 29 November 2024, S&P Global Ratings announced its ratings action on Transnet placing
Transnet's ratings on credit watch negative on elevated leverage. Transnet's ratings remained
unchanged.
PROSPECTS
Transnet has made progress, with early successes in stabilising operations, improving financial
performance, and addressing infrastructure challenges. While significant work remains,
particularly in areas including debt management and security, the ongoing reforms and leadership
stability provide a strong foundation for continued recovery and long-term sustainability. Transnet
remains committed to its role in supporting South Africa's economic recovery and is focused on
delivering efficient, world-class logistics services for the benefit of the country.
Transnet's progress in line with its recovery plan continues to be hampered by operational
challenges that are impeding the clear progress made in revenue and cash generation from
operations after working capital changes.
The Board and management will remain focused on the implementation of the recovery plan and
direct significant focus on resolving operational challenges to ensure that the tangible gains made
thus far are translated into sustainable profitability.
Projects focused on improving rolling stock availability and the rail infrastructure condition will be
prioritised while building on improved efficiencies and customer projects that have aided improved
volume performance on the general freight business and export coal lines.
The replenishment of key port equipment in the short- and medium-term as well as the acquisition
of critical spares to support the maintenance teams is a key focus area across all terminals and
will go a long way to sustain efficient and improved performance at the ports. The Department
of Transport and National Treasury are both monitoring the progress of the recovery plan and
the Guarantee Framework Conditions.
Cost control measures continue to be implemented, along with better planning and execution of
maintenance, employee training and incentives to support improved operational delivery.
Transnet is working closely with government in the transformation of the logistics sector and the
initiatives will support the long-term sustainability of the business.
31 December 2024
JSE Debt Sponsor
Absa Corporate and Investment Bank (a division of Absa Bank Limited)
Date: 31-12-2024 09:45:00
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