29 October 2015 presentations/Transnet... · 2015-10-29 · Transnet raised R12,5 billion for the...

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


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



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


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



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


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


7

13 90312 760

2014

+9,0%

2015

+1,0%

2015

43,142,1

2014


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


8

6 8895 757

+19,7%

20152014

744653

+13,9%

20152014

3 5843 331

+7,6%

20152014

1 7782 144

-17,1%

20152014


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



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


10

-1,2%

March 2015

6,0

September 2015

4,8


**

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


11

+1,4%

41,4

September 2015March 2015

40,0

125 023

110 377

+13,3%

September 2015March 2015


* 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



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


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%


Compound annual growth rate

MAJOR CAPITAL DELIVERIES


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.


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




-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



• 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.


Volumes (mt)




+0,5%

+7%

Sept 2015

30,0

Sept 2014

27,9


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



• 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.


Volumes (mt)

Ra

il –

ge

ne

ral fr

eig

ht b

usin

ess (

GF

B)

17




Sept 2014

+9%

Sept 20152015

46,1

2014

43,1

99,0


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)


• 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)




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)


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




+1%

+6%

Sept 2015

8,9

Sept 2014

8,4


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.


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


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


B-BBEE spend and CSDP

B-BBEE SPEND AND CSDP


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


**

*

*

**

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.


THANK YOU

29 October 2015 presentations/Transnet... · 2015-10-29 · Transnet raised R12,5 billion for the...

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