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Transnet posts profit as it gets unqualified audit for the first time since 2018

Transnet CEO, Portia Derby. Transnet yesterday released its annual financial results. Picture: Screenshot of Microsoft Teams meeting

Transnet CEO, Portia Derby. Transnet yesterday released its annual financial results. Picture: Screenshot of Microsoft Teams meeting

Published Jul 28, 2022

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Transnet has swung into a R5 billion profit for the year ended March 31, 2022, up from a loss of R8.7bn reported a year ago, following significant fair value adjustments in the company’s investment property valuation.

The logistics company bucked the trend of poor performing state-owned enterprises (SOEs) in spite of weak economic growth and persistent operational challenges.

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Transnet also received an unqualified audit report for the first time since 2018 as irregular and wasteful expenditure declined materially.

The unqualified audit opinion was critical because it has had a number of implications for Transnet with regard to fund-raising and just being active in the capital markets.

Transnet chief executive Portia Derby yesterday said that the company was gradually recovering from the Covid-19 headwinds and the disruption to global supply chains.

Domestically, Derby said Transnet had to recover from massive vandalism last year after 1 500 kilometres of cable was lost.

Transnet lost more than 15 million tons of freight volumes for the year ended March due to vandalism and theft of overhead cables on its coal line.

“Transnet Freight Rail has recently embarked on a pilot project in partnership with the National Defence Force to look at the deployment of additional security resources to help in securing affected infrastructure,” Derby said.

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“The Operating Division also continues to partner with customers on security deployment on key corridors in order to clamp down on theft and minimise operational disruption.”

Transnet’s significant increase in profits is mainly attributable to the improvement in the Ebitda, a decrease in asset impairments and an increase in fair value adjustments related mainly to investment property.

The group’s revenue increased by 1.8 percent to R68.5bn, with earnings before interest, taxation, depreciation and amortisation improving by 20.5 percent to R23.4bn.

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Transnet group chief financial officer Nonkululeko Dlamini said they curtailed expenditure to R13.2bn in the past year from R18.6bn the prior year.

Dlamini said net operating expenses were down by 5.9 percent at R45bn for the year.

“So with all that taken into account, we are reporting a bottom line profit of R5bn as Transnet, which is a swing of R13bn compared to the loss of R8.7bn that we reported in 2021 financial year,” she said.

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“We've had to relook at our investment property. We have, therefore, strengthened the balance sheet to an extent of reporting gearing of 45.5 percent, which is an improvement from what we reported in the prior year.”

Transnet’s irregular expenditure declined to R104.3bn while fruitless and wasteful expenditure was at R728 million.

Transnet chairperson Popo Molefe said they had begun to put measures in place to deal with issues pertaining to internal controls of the organisation to arrest irregular and fruitless, wasteful expenditure within the company.

Molefe said the company continued experiencing the challenge of repeated events of theft of overhead cables, the distraction of the rail network, even the stealing of the rails themselves.

“We do think that with the challenges that are facing Transnet and the changing global economic context, it is critical that Transnet begins to find innovative ways of growing its business,” he said.

Public Enterprises Minister Pravin Gordhan said the Transnet results, which showed financial stability, were an important landmark occasion as it recovered from the period of state capture.

“State capture had impacted on the operations of Transnet, on the financial stability of Transnet, on key equipment that is locomotives, some of which still remains unresolved today,” Gordhan said.

“But the Transnet management team and the colleagues have shown a remarkable amount of agility and commitment to getting the business back on track and ensuring that no further damage was done to Transnet infrastructure and property.”

BUSINESS REPORT

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