Transnet sees green shoots despite another challenging year

Transnet’s executives and board made no bones about its last financial year (April 2021 to March 2022) being one of its most challenging at a results presentation on Wednesday, despite the year seeing eased Covid-19 restrictions following the pandemic fallout in 2020.

But they were clearly more optimistic that the turnaround of the state-owned ports and rail company is gaining traction and business prospects are also continuing to improve.

Read: Transnet swings from over R8bn FY loss to a R5bn profit

Despite the July riots affecting operations at its busiest container terminal – the Port of Durban, together with a major cyber attack hitting all port operations, spiralling incidents of cable theft, and force majeures affecting port terminal operations countrywide as well as coal deliveries to Richards Bay, Transnet managed to return to profit.

The group posted a R5 billion profit for the year ended 31 March 2022, compared to a R8.7 billion loss (restated) for the Covid-hit prior financial year. However, revenues are yet to recover to pre-Covid levels.

FY2022 revenue increased by a modest 1.8% to R68.5 billion, compared FY2021. But revenue for its financial year ended March 2020 (pre-Covid) was almost R7 billion more, at R75.1 billion.

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Nonkululeko Dlamini, Transnet’s CFO, said the group was pleased to see some “green shoots” after the Covid-19 financial blow in FY2021.

Unqualified audit

She added that Transnet securing an unmodified or unqualified audit from the Auditor-General’s office for FY2022 was a major milestone, especially considering that it is the first unqualified audit for the group in four years.

“Having qualified audits in the previous years presented challenges for us from a funding perspective,” she said.

Read: Transnet secures R25.5bn credit facility, with Deutsche Bank as lead bookrunner

Dlamini noted that the qualified audit opinions for prior years were largely linked to “legacy issues” around irregular expenditure related to the State Capture years.

She said these issues were ring-fenced by National Treasury, which allowed Transnet to be given an unqualified audit for its latest financials.

Transnet group CEO Portia Derby said that notwithstanding all the challenges during the last financial year, it is positive that the company has shown an improved financial performance following the Covid low.

She however acknowledged that the group is yet to get back to pre-Covid levels from a revenue and freight volumes perspective.

Cyber attack and cable theft

Derby conceded that the cyber attack on Transnet in July last year was “significant” and said the group continued to face challenges around the unavailability of locomotives and spiralling cable theft incidents, which were major contributing factors to the group’s rail coal supply woes.

“We lost 1 500 kilometres of cable last year [through cable theft] and we have to pay for it [to replace it]. This [cable theft] is having a massive impact on the rail system,” said Derby.

“Until we break the back of cable theft, the impact is going to be devastating – not just for Transnet, but for the country.”

Listen to Derby speaking about Transnet’s latest financial results (or read the transcript):