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INTERIM RESULTS FOR THE PERIOD ENDED 30 SEPTEMBER 2015
29 October 2015
AGENDA
FOR THE PERIOD ENDED 30 SEPTEMBER 2015
EXECUTIVE SUMMARY
FINANCIAL RESULTS
CAPITAL INVESTMENT
VOLUMES AND OPERATIONS
HUMAN CAPITAL
SUSTAINABLE DEVELOPMENT
CONCLUSION
TRANSNET REVIEWED INTERIM RESULTS 1
Cash generated from operations
increased by 11,6% to R15,2 billion.
Export iron ore volume growth of 7,5%
and containers and automotive volumes
on rail growth of 4,2%.
B-BBEE spend of R26,97 billion or 96,5%
of Total Measured Procurement Spend
(TMPS) for the period per DTI codes.
Revenue increased by 6,4% to
R32,2 billion.
Capital investment of R16,1 billion,
bringing the spend during MDS to
R108,9 billion.
EBITDA increased by 9,0% to
R13,9 billion.
Gearing at 41,4% and cash interest
cover at 3,0 times.
DIFR at 0,65 reflects a stable safety
record.
EXECUTIVE SUMMARY
FOR THE PERIOD ENDED 30 SEPTEMBER 2015
2TRANSNET REVIEWED INTERIM RESULTS
EBITDA margin increased by 1,3%
from 41,8% in March 2015 to 43,1%.
Port bulk and break-bulk volumes grew
by 11,8% to 50,3mt.
ACTUAL PERFORMANCE TO DATE
FOR THE PERIOD ENDED 30 SEPTEMBER 2015
3TRANSNET REVIEWED INTERIM RESULTS
Rail Ports Pipelines
September 2015 volume growth %
6,0
(1,8)
2,3
Weighted group volume performance +0,5%
Revenue
EBITDA*
Depreciation
Finance cost
Net profit for the period
Capital investment
Cash interest cover (times)**
Gearing***
The sharp downturn in economic activity
resulted in a drop in volumes handled.
Customers downscaling operations.
GDP growth tracking below expectations:
* Including Regulator claw backs.
** Cash interest cover is 3,0 times as at 30 September 2015, and was 3,6 times as at 31 March 2015.
*** Absolute variance.
**** September 2015 vs March 2015.
+6,4%
+9,0%
+19,7%
+7,6%
(17,1%)
(13,9%)
(0,6)
+1,4%
Sept 2015 vs
prior period
2012 1st year of MDS 3,8%
2015 Budget
2015 BER forecast
2015 Minister mini budget
2,1%
1,7%
1,5%****
****
Abridged income statementABRIDGED INCOME STATEMENT
FOR THE PERIOD ENDED 30 SEPTEMBER 2015
2015 2014 %
R million R million variance
Revenue 32 228 30 282 6,4
Net operating expenses excluding depreciation, derecognition and amortisation
(18 325) (17 522) 4,6
EBITDA 13 903 12 760 9,0
Depreciation, derecognition and amortisation (6 889) (5 757) 19,7
Profit from operations before items listed below 7 014 7 003 0,2
Impairment of assets, fair value adjustments and other items (1 061) (719) 47,6
Net finance costs (3 412) (3 227) 5,7
Profit before taxation 2 541 3 057 (16,9)
Taxation (763) (913) (16,4)
Profit for the period 1 778 2 144 (17,1)
TRANSNET REVIEWED INTERIM RESULTS 4
Revenue (R million) Rail volumes (mt)
32 22830 282
2015
+6,4%
2014
Revenue contribution by Operating Division** (%)
TFR50
15
TE
16
TPL
TNPA
5TPT
14
* Variance % to prior period.
** Excludes specialist units and intercompany eliminations.
34,832,9
10,510,37,5
4,6
110,5
9,85,5
41,3
2015
-1,8%
43,7
108,5
2014
10,9
7,2
Containers and automotive (+4%)*
Iron ore and manganese (+6)%*
Mineral mining and chrome (+2%)*
Coal (-5%)*
Agriculture and bulk (-16%)*
Steel and cement (-10%)*
Port containers (‘000 TEUs)
2 3422 290
2015
+2,3%
2014
Revenue and volumesREVENUE AND VOLUMES
FOR THE PERIOD ENDED 30 SEPTEMBER 2015
5TRANSNET REVIEWED INTERIM RESULTS
The operating cost increase was limited to 4,6% in line with inflation, to R18,3 billion in spite of a 9,6% increase in personnel costs to R9,8 billion
and a 4,3% increase in electricity costs.
The cost increase was contained by numerous cost-reduction initiatives, which resulted in a R3,1 billion saving against planned costs.
21
Net operating expenses (R million) Net operating expenses contribution by
cost element (%)
25
4
17
54
Other operating expenses
Material and maintenance costs
Energy costs
Personnel costs
Operating expenses OPERATING EXPENSES
FOR THE PERIOD ENDED 30 SEPTEMBER 2015
6
18 32517 522
20152014
+4,6%
TRANSNET REVIEWED INTERIM RESULTS
** Excludes specialist units and intercompany adjustments.
EBITDA (R million)
EBITDA margin (%)
EBITDA contribution by Operating Division** (%)
TNPA
TE
27
TPT11
10
TPL
TFR
2
50
EBITDAEBITDA
FOR THE PERIOD ENDED 30 SEPTEMBER 2015
7
13 90312 760
2014
+9,0%
2015
+1,0%
2015
43,142,1
2014
TRANSNET REVIEWED INTERIM RESULTS
EBITDA growth of 9,0% well above GDP
growth of 1,5%.
* Absolute variance.
*
Depreciation, derecognition and amortisation of assets for the period increased
by 19,7% to R6,9 billion, due to the depreciation of revalued rail infrastructure,
port facilities and pipelines as well as the capital investments for the period. This
trend is expected to continue in line with the execution of the capital investment
programme.
Impairment of assets, amounting to R744 million relates primarily to property,
plant and equipment as well as trade and other receivables due to the difficult
economic environment. The property, plant and equipment impairment pertains
mainly to an impairment on the pipeline specifically relating to the coastal
terminal accumulator tanks.
Finance costs increased by 7,6%, in line with expectations, due to increased
borrowings to fund the capital investment programme.
Depreciation, derecognition and amortisation (R million)
Impairment of assets (R million)
Net profit for the period (R million)
Accordingly net profit for the period decreased by 17,1%, mainly due:
• The downturn in global economic activity affecting volumes handled;
• GDP growth expectations dropping from 2,1% to 1,5%; and
• Increased depreciation and finance costs due to the intensive capital
investment programme.
Finance costs (R million)
DEPRECIATION, IMPAIRMENT, FINANCE COSTS AND NET PROFIT
FOR THE PERIOD ENDED 30 SEPTEMBER 2015
8
6 8895 757
+19,7%
20152014
744653
+13,9%
20152014
3 5843 331
+7,6%
20152014
1 7782 144
-17,1%
20152014
TRANSNET REVIEWED INTERIM RESULTS
Abridged statement of financial position
September 2015 March 2015
R million R million
ASSETS
Property, plant and equipment 301 053 287 166
Investment properties 9 252 9 074
Other non-current assets 14 422 9 701
Non-current assets 324 727 305 941
Current assets 24 648 22 498
Total assets 349 375 328 439
EQUITY AND LIABILITIES
Capital and reserves 146 845 142 328
Non-current liabilities 157 188 145 853
Current liabilities 45 342 40 258
Total equity and liabilities 349 375 328 439
ABRIDGED STATEMENT OF FINANCIAL POSITION
FOR THE PERIOD ENDED 30 SEPTEMBER 2015
9TRANSNET REVIEWED INTERIM RESULTS
PPE increased by 4,8% to R301,1 billion, mainly as a result of
the capital investment for the period of R16,1 billion, with
R6,7 billion being invested in the expansion of infrastructure
and equipment, while R9,4 billion was invested in maintaining
existing capacity.
Transnet is committed to investing in an optimised capital
portfolio that remains responsive to validated demand.
Return on total average assets at 4,8% is due to:
• The significant increase in the asset base;
• Volumes not materialising as a result of the downturn in the
economy resulting in customers downscaling operations; and
• Lower GDP growth, resulting in a lack of demand.
Property, plant and equipment (R million)
Return on total average assets (excluding CWIP) (%)*
* Includes Regulator claw backs.
** Absolute variance.
Property, plant and equipment (PPE)
1 785
3 075
16 085(284) 301 053
OtherBorrowing costs
+4,8%
Sept 2015Depreciation & derecognition
(6 774)
RevaluationAdditionsMarch 2015
287 166
PROPERTY, PLANT AND EQUIPMENT
FOR THE PERIOD ENDED 30 SEPTEMBER 2015
10
-1,2%
March 2015
6,0
September 2015
4,8
TRANSNET REVIEWED INTERIM RESULTS
**
Transnet raised R12,5 billion for the period and repaid
borrowings amounting to R5,3 billion. The 13,3% increase is
in line with the funding plan for the capital investment
programme.
The gearing ratio is at 41,4% (March 2015: 40,0%) due mainly to
the execution of the capital expenditure programme. This level is
still well below the Group’s target range of 50,0%, reflecting the
capacity available to continue with the investment strategy. The
gearing ratio is not expected to exceed the target ratio over the
medium-term.
Total borrowings (R million)
Gearing (%)
Total borrowingsTOTAL BORROWINGS
FOR THE PERIOD ENDED 30 SEPTEMBER 2015
11
+1,4%
41,4
September 2015March 2015
40,0
125 023
110 377
+13,3%
September 2015March 2015
TRANSNET REVIEWED INTERIM RESULTS
* Absolute variance.
*
Cash interest cover (times)
3,6
March 2015
3,0
September 2015
3,0
Sources of funding
Sept2015
March 2015
R billion R billion
DFI’s/ECA’s/BTMU and bank loans
7,3 16,0
Domestic bonds and commercial paper 5,2 9,1
Call loans - 9,0
Total 12,5 34,1
Long-term foreign currency Baa2/Stable outlook BBB-/Stable outlook
Abridged cash flow statement and fundingABRIDGED CASH FLOW STATEMENT AND FUNDING
FOR THE PERIOD ENDED 30 SEPTEMBER 2015
12TRANSNET REVIEWED INTERIM RESULTS
2015 2014 %
R million R million Change
Cash flows from operating activities 10 282 14 111 (27,1)
Cash generated from operations 15 189 13 613 11,6
Changes in working capital (1 665) 4 099 (140,6)
Other operating activities (3 242) (3 601) (10,0)
Cash flows utilised in investing activities (18 188) (19 734) (7,8)
Cash flows from financing activities 7 146 7 014 1,9
Net (decrease)/increase in cash and cash equivalents
(760) 1 391 (154,6)
Cash and cash equivalents at the beginning of the period
6 264 3 633 72,4
Total cash and cash equivalents at the end of the period
5 504 5 024 9,6
Credit rating
Long-term local currency Baa2/P-2/Stable outlook BBB+/Stable outlook
CAPITAL INVESTMENT ANALYSIS
FOR THE PERIOD ENDED 30 SEPTEMBER 2015
13
Capital investment by commodity
Capital investment by operating segment
Replacement: R9,4 billion
Expansion: R6,7 billion
Expansion vs replacement
67%
12%
GFB
3%
Export coal
3%Bulk
3%Manganese
5%
Export iron ore 3%
Port containers4%
Piped products Other
79%
13%
4%4%
Pipelines
Rail
Ports
Engineering and other
42%
58%
Capital investment excluding intangible assets (R billion)
16,1
September 2015
2015
33,9
2014
31,8
2013
27,5
2012
21,5 22,3
2011
+12,1%
TRANSNET REVIEWED INTERIM RESULTS
Compound annual growth rate
MAJOR CAPITAL DELIVERIES
FOR THE PERIOD ENDED 30 SEPTEMBER 2015
14
Quantity
Asset type Sept 2015 Cumulative
Locomotives
60 Class 43 Diesel 35 60
95 Class 20 Electric 1 95
100 Class 21 Electric 52 66
359 Class 22E Electric 23 23
233 Class 44 Diesel 6 6
232 Class 45 Diesel Design freeze stage
240 Class 23E Electric Design freeze stage
Wagons
GFB 1 353 9 341
Asset type Quantity
Rail refurbishment: Infrastructure
Turnouts 73
Universals 159
Screening 233km
Sleepers 196 408
Asset type Stage of completion
Pipeline infrastructure
Coastal terminal 90,3%
Inland terminal 97,3%
NMPP 24” Trunkline is fully operational conveying single product (diesel) only.
TRANSNET REVIEWED INTERIM RESULTS
Volumes (mt)
Productivity and efficiency
Route density (Richards Bay corridor)
Tonkm/Routekm
On-time arrivals (minutes)
• Export coal volumes have
grown from 67,7mt in FY2012
to 76,3mt in FY2015. Sept
2015 Year-to-date actual
volumes are 3% below the
prior period, largely due to:
Cancellations by some
customers in response to
declining international coal
prices.
• The latest estimate reflects a
2% volume shortfall against
the prior year.
• Due to focused attention on
operational efficiency
improvements, on-time
departures reflect well.
On-time departure (minutes)
Rail
–e
xp
ort
co
al
VOLUMES AND OPERATIONS
FOR THE PERIOD ENDED 30 SEPTEMBER 2015
15TRANSNET REVIEWED INTERIM RESULTS
-2%
-3%
Sept 2015
35,4
Sept 2014
36,5
2016 Latest Estimate
75,0
2015
76,3
2014
68,2
2013
69,2
2012
67,7
-17.85-0.58
43
206209
2012 Sept 2015
20152013 2014
2,978%
263
170134
332375
55%
Sept 2015
2015201420132012
Sept 2015
40,737,4 -1%
2015
41,1
2014
Rail
–e
xp
ort
iro
n o
re
Productivity and efficiency
On-time arrivals (minutes)
• Export iron ore volumes have
grown from 52,3mt in FY2012 to
59,7mt in FY2015. Sept 2015
YTD volume performance is 7%
higher than the prior period. This
volume performance is attributed
to:
Key customers recovered from
production constraints; and
Internal resource availability
improved through sustained
implementation of the capital
investment programme.
• The latest estimate reflects a
marginal improvement over the
prior year. Efforts are underway
to increase performance levels.
• Both on-time departures and on-
time arrivals are below the prior
year mainly due to two mainline
derailments, and tippler
challenges.
On-time departure (minutes)
Volumes (mt)
VOLUMES AND OPERATIONS
FOR THE PERIOD ENDED 30 SEPTEMBER 2015
16TRANSNET REVIEWED INTERIM RESULTS
+0,5%
+7%
Sept 2015
30,0
Sept 2014
27,9
2016 Latest Estimate
60,0
2015
59,7
2014
54,3
2013
55,9
2012
52,3
73
-24
9
7367
Sept 2015
2012 2013
401%
20152014
273
57
129140133 379%
2015 Sept 2015
2013 20142012
Productivity and efficiency
On-time arrivals (minutes)
• GFB volumes have grown from
81mt in FY2012 to 90,5mt in
FY2015. The current period
performance has declined
significantly, with volumes 7%
below the prior period. This is
mainly due to:
Customer cancellations due to
the negative impact of the
economy; and
Eskom related power outages
that continue to impact
performance.
• The latest estimate reflects a 9%
increase over FY2015. Planned
improvements are expected to
result in a recovery in the
second half of the year with the
objective of achieving 99mt.
• Both on-time departures and on-
time arrivals improved
significantly against prior year.
This is mainly due to continuous
focus on en-route monitoring of
mainline trains by the Transnet
National Command Centre.
On-time departure (minutes)
Volumes (mt)
Ra
il –
ge
ne
ral fr
eig
ht b
usin
ess (
GF
B)
17
VOLUMES AND OPERATIONS
FOR THE PERIOD ENDED 30 SEPTEMBER 2015
TRANSNET REVIEWED INTERIM RESULTS
Sept 2014
+9%
Sept 20152015
46,1
2014
43,1
99,0
2016 Latest Estimate
88,0 90,5
20132012
81,0 82,6
-7%
-8
79
213
280284
201420132012
110%
Sept 2015
2015
86
201
340356357
2012 2014 Sept 2015
2015
57%
2013
Po
rts –
co
nta
ine
rs
Volumes (‘000 TEUs)
Productivity and efficiency
• Port container volumes have grown
from 4,3 million TEUs in FY2012 to
4,6 million TEUs in FY2015. Sept
2015 YTD volume performance is
2% above the prior period and is
expected to be above the year end
according to latest estimates. This
is mainly due to:
A marginal increase in import
and export containers, in line
with the subdued economic
activity.
• Ship turnaround times improved at
all ports except for Port Elizabeth
bulk handling (manganese) and
East London. Performance
improvements are planned to
address tippler challenges at Port
Elizabeth and longer than
expected waiting times for export
cargo experienced at the port of
East London.
• The average overall train
turnaround time improved from
prior year, with notable
improvements in Pier 1, Pier 2 and
Port Elizabeth.
Ship turnaround time (hours)
18
Train turnaround time (hours)
VOLUMES AND OPERATIONS
FOR THE PERIOD ENDED 30 SEPTEMBER 2015
TRANSNET REVIEWED INTERIM RESULTS
2 3422 290
4 6464 5714 5034 2374 305
+2%
Sept 2015Sept 20142016 Latest Estimate
2015201420132012
+2%
70
464334
78
50
2627
51
84
464226
6265
2124
48
Cape TownDurban Manganese (Port
Elizabeth)
Iron ore (Saldanha)
Coal (RBCT)NgquraRichards BayEast LondonPort Elizabeth
Sept 2015March 2015
8,9
Port Elizabeth
9,4
Richards Bay
8,68,5
Saldanha
1,81,9
CTCT
1,11,0
DCT - Pier 2
2,93,3
DCT - Pier 1
2,63,3
Pip
elin
es
Volumes (bℓ)
Productivity and efficiency
Operating cost per Mℓ.km (Nominal R/Mℓ.km)
• Petroleum volume
performance has increased
from 16,7 billion litres in
FY2012 to 17,2 billion litres in
FY2015. Sept 2015 YTD
volume performance is 6%
above the prior period and is
also expected to be above the
prior year. The strong volume
performance is attributed to:
Increased Avtur volumes
transported from the coast;
and
Improved crude volumes.
• NMPP capacity utilisation
averaged 113,9 mega-litres
per week, and is marginally
below the prior year. This is
however expected to gain 4%
over 2015 full-year
performance.
• Service delivery is on par with
prior year.
• Pipeline operating costs are
below the prior year, reflecting
a very efficiently run business.
DJP + NMPP capacity utilisation (Mℓ/Week)
Ordered vs delivered volumes
(% of deliverables within 5% of order)
Planned vs actual delivery time
(% of deliverables within 2 hours of plan)
19
NMPP
DJP
VOLUMES AND OPERATIONS
FOR THE PERIOD ENDED 30 SEPTEMBER 2015
TRANSNET REVIEWED INTERIM RESULTS
+1%
+6%
Sept 2015
8,9
Sept 2014
8,4
2016 Latest Estimate
17,4
2015
17,2
2014
16,6
2013
15,9
2012
16,7
-1%
Sept 2015
113,9
60,9
52,9
2015
115,3
56,5
58,8106120
9989
-12%
Sept 2015
201520142013
+1%
Sept 2015
85,0
2015
84,0
2014
81,09999 100
2015 Sept2014
-1%
2015
Disabling injury
frequency rate
(DIFR)
Employee
fatalities
(Numbers)
Public
fatalities
(Numbers)
SAFETY – Transnet continues to record a DIFR ratio below 0,75
2014
0,650,65
2015
0,69
2012
0,74
2013
0,69
Sept 2015
34
7
9
7
2013 2014 Sept 20152012 2015
The Company recorded a DIFR
performance of 0,65 compared to the
target of 0,75. Transnet continues to
record a DIFR ratio below 0,75, due to
continued focus and investment in safety.
The organisation remains committed to zero
employee fatalities (motor vehicle incidents).
Despite considerable efforts to improve
safety, the Company regrets to report three
employee fatalities for the 6 month period.
• Mr Xolisile Gwata;
• Mr Petrus Johannes Roodt; and
• Mr Shemuel Mathew Padavath.
20TRANSNET REVIEWED INTERIM RESULTS
96106
125
10088
201520132012 2014 Sept 2015
A total of 88 public fatalities were reported.
These fatalities are due mainly to people
trespassing onto operating railway lines. The
company has employed various
communication and media initiatives to inform
the public of the dangers of level crossings.
Transnet is also continuing with rail network
protection initiatives.
Human resourcesHUMAN RESOURCES
FOR THE PERIOD ENDED 30 SEPTEMBER 2015
21
A representative workforce.
Skills development, capacity
building and job creation.
• Transnet achieved and exceeded its targets
for black employees.
• Female representation is growing steadily
despite significant challenges in an operations
heavy environment at semi and unskilled
levels.
• Transnet invested 3,3% of the labour cost bill on skills development initiatives to grow and develop capacity
requirements to support MDS (focusing on operational and technical training).
• Apprentices intake is seasonal and dependent on the apprentice phases and is therefore not linked to a quarterly target.
• Engineering trainees intake is linked to academic year and not financial and quarterly targets.
• The Schools of Excellence in Transnet continued to be a great flagship of the Transnet Academy’s delivery platforms to
contribute to local and regional skills development.
• In October 2015, Freight Rail was named as one of South Africa’s top employers for 2015 by the Top Employers
Institute.
Actual % Annual
Target %
Designated categories 2015 2015
Black 83,7 80,0
Females at Group Exco 40,0 50,0
Females at extended Exco 43,9 50,0
Females below extended Exco 27,2 37,0
PWD’s 2,3 2,5
Key performance indicator Unit of measure
Annual
target
2015
Actual
Training spend % of personnel costs
Rand million
> 3,4 3,3
311,7
Engineering trainees Number of learners > 155 13
Technician trainees Number of learners > 200 135
Artisan trainees Number of learners > 665 50
Sector specific trainees Number of learners > 2 000 947
TRANSNET REVIEWED INTERIM RESULTS
B-BBEE spend and CSDP
B-BBEE SPEND AND CSDP
FOR THE PERIOD ENDED 30 SEPTEMBER 2015
Broad-based
black economic
empowerment
(B-BBEE) and
local supplier
industry
development.
Transnet is
currently a level 2
contributor.
% B-BBEE spend of TMPS B-BBEE categories spend % of TMPS
Supplier development (SD) programme (R million)
22
8585
97106
2015
-8%
2014
ActualTarget
58 8
26
2219
107
+3%+3%
2014 2015
-3%-18%
Black woman-owned
Black-ownedExempted micro-enterprises
Qualifying small enterprises
* Various QSE & EME reclassified to large entities.
** Includes locomotive build programme.
+207%
Total contract value
99,282
32,319
20152014
Committed SD obligation
12,230
+341%
53,892
Actual SD obligation delivered
+92%
7,951
15,235
TRANSNET REVIEWED INTERIM RESULTS
**
*
*
**
CONCLUSION
• The fourth period of MDS implementation has proved challenging, however the Company has
maintained its financial and operating performance, evidenced by sustained growth well above GDP.
• Transnet remains committed to delivering on its mandate and the MDS in a responsible manner.
• The Board and executive management will continue to manage risks effectively in order to navigate
through challenging economic conditions, thereby ensuring that capacity is created ahead of validated
demand.
23TRANSNET REVIEWED INTERIM RESULTS
THANK YOU