Transnet Reports Higher Losses

Transnet, the state-owned operator of rail and ports in South Africa, has reported an increased loss for the first half of the year, as ongoing issues with infrastructure and security continue to hinder efforts to rejuvenate the company.

The loss amounted to R2.2 billion for the six months ending in September, compared to R1.6 billion for the same period last year, as highlighted in an email announcement made on Tuesday.

The company has once again secured waivers — similar to the previous year — from financial institutions to avert a debt default following breaches of loan covenants in recent months.

ADVERTISEMENT

CONTINUE READING BELOW

Escalating debt servicing expenses have lowered Transnet’s cash interest cover — the ratio of earnings available for paying interest — to 1.9 times, while several loans mandate a minimum of 2.5 times. During this timeframe, net finance costs increased by 7.9% to R7.1 billion.

Check out: Transnet’s rail monopoly is coming to an end

As a crucial player for South Africa’s import and export operations, Transnet has struggled with a lackluster performance in recent years. Rail inefficiencies reportedly cost the economy over R400 billion in 2022, according to the National Treasury, while the nation’s minerals council estimates that mining exports missed their R50 billion target.

The ports operated by Transnet have been deemed among the least efficient on a global scale.

“Transnet has made progress, achieving initial successes in stabilizing operations, improving financial outcomes, and addressing infrastructure challenges,” the company stated.

The organization plans to concentrate on initiatives that improve the availability of rolling stock and enhance rail infrastructure conditions. Additionally, the ports are prioritizing the repair of essential equipment and the procurement of critical spare parts.

Transnet launched a turnaround strategy over a year ago aimed at revitalizing its rail and port services while addressing the fallout from past mismanagement, theft, and vandalism.

“There remains considerable work to be done, particularly in relation to debt management and security challenges,” it acknowledged.

“Transnet’s progress in line with its recovery strategy continues to be impeded by operational obstacles that are restricting the noticeable advancements made in generating revenue and cash flow from operations after accounting for working capital adjustments.”

For in-depth financial and business news, follow Moneyweb on WhatsApp here.