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Transnet infrastructure upgrade hits R312.2bn

Transnet is in the third year of its rolling seven-year investment programme aimed at revamping the country’s logistics infrastructure. The programme has hit a record R312.2 billion, Transnet Group chief executive Brian Molefe said in its annual results.

Growth in revenue

Transnet’s revenue for the period under review grew to R56.6 billion, driven by a 14.2% increase in minerals and chrome volumes, and a 25.2% rise in automotive volumes and containers on rail.

“The latter confirms the strides the company’s rail freight unit, Transnet Freight Rail, is making in gaining market share through its focus on road-to-rail migration,” commented Molefe.

EBITDA

Transnet’s key measure of profitability, EBITDA (earnings before interest, taxation, depreciation and amortisation), saw a 12.3% jump to R23.6 billion from the previous year’s R21.1 billion.

The surge in EBITDA was despite a 13.1% increase in operating costs to R33 billion, due to pressure from energy costs, which rose 10.3%, and a 14,6% rise in personnel costs.

Higher electricity, fuel costs

The former was driven by higher electricity and fuel price increases, while personnel costs were driven by a two-year wage settlement for non-managerial staff.

Despite the pressure on operating costs, management’s focus on cost containment yielded a R2.1 billion saving against planned costs.

Working capital

Cash generated from operations after working capital changes rose 11.6% to R25.3 billion, demonstrating Transnet’s ability to generate strong sustainable cash flows.

The strong cash flow boosted the company’s cash interest cover ratio to 3.7 times, keeping it significantly above the target of 3 times.

Finance costs

This is despite an increase in finance costs from rising borrowings as the capital investment programme accelerates. Cash interest cover is a key consideration for investors as it indicates a company’s ability to service its debt.

During the period, Transnet raised R22.4 billion from the market and repaid R8 billion.

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