Transnet’s results ‘not as bad as anticipated’ says Derby

Transnet group CEO Portia Derby says while the group’s latest financial results are “bad”, things could have been far worse if management had not taken steps to mitigate the impact of the Covid-19 financial fallout last year.

“The bad results were not the reason for the delay [in publishing the full-year results to March 31, 2021]. In fact, the results are not as bad as anticipated,” she said during a media briefing late on Friday.

Read: Transnet’s record R8.4bn loss for Covid-hit financial year

She noted that the group embarked on a major cash conservation drive in order “to survive SA’s massive economic slowdown” because of the Covid-19 pandemic and related lockdowns last year. This included slashing its capex by almost 15%.

“While we were dealing with Covid-19, Moody’s [rating agency] downgraded SA’s credit rating further last year, and as a SOE [state-owned enterprise], Transnet was also directly impacted,” said Derby.

“Despite all this, we continued to pay all our staff in full, some 55 827 of them, without cutting any benefits,” she pointed out.

“Despite all the group faced, our balance sheet remains resilient.”

Derby said the group swinging from a profit in its prior financial year to an R8.4 billion loss was largely due to the Covid-19 financial fallout.

“Transnet, as one of the providers of essential services for SA, continued to deliver on its mandate despite nationwide lockdowns since 26 March 2020. However, Covid-19 had a material adverse impact on the operational performance, financial results and workforce of the company,” she stressed, reiterating sentiments in the group’s results Sens statement.

Transnet reported that group revenue declined 10.5% to R67.3 billion, while its Ebitda (earnings before interest, taxes, depreciation, and amortisation) plunged almost 43% to R19.5 billion, after its Ebitda margin declined to 28.9%.

This resulted in its cash generated from operations sliding to R24.4 billion, while capex for the financial year was reduced to R15.9 billion.

The group ended its financial year with gearing of 48.7% (its debt stands at around R129 billion) and a cash interest cover at ‘2 times’.

Its debt service costs came to R29 billion in terms of both capital repayments and interest paid.

Transnet group CFO Nonkululeko Dlamini said considering the impact of Covid-19 on the group, especially in the first half of its financial year (April to June) when harder lockdowns were in place, revenues came under significant pressure.

“We did see a significant reduction in our revenue line. It was the Covid-19 year and it was expected that we got this kind of performance,” said Dlamini.

“What is critical is that we were still a cash-generative business,” she added.

Asked about the outlook for Transnet, Dlamini was a lot more optimistic, saying there has been a “significant improvement” in business for the current financial year.

She did not give specifics as the group will update the market in its 2022 half-year results.

“The new [financial year] has seen a significant improvement than last year. We have certainly seen an improvement and are trending better for this year, but we have to be aware of the impact of possible further wave of Covid-19,” Dlamini warned.