Company Announcement: Transnet impresses with record rail volumes, adds over 3 000 new employees
Construction|DURBAN|Engineering|Harbour|Port|Port Elizabeth|SECURITY|Africa|CoAL|Diesel|Energy|French Development Bank|Locomotives|Paper|Pipelines|Ports|Rio Tinto|Road|Roads|Safety|Security|Transnet|Transnet SOC Ltd|Africa|Mozambique|South Africa|United States|New Multi-Product Pipeline|Port Of Ngqura|Port Terminals|Security|Energy|Energy Prices|Equipment|Manufacturing|Pipeline Network|Product|Security|Eastern Cape|Richards Bay|Iron Ore|Rail|Security|Harman On Time Radio|Locomotive|Locomotives|Pipelines|Eastern Cape|Diesel
Transnet SOC Ltd today announced an impressive set of results for the financial year to March 2012, driven by strong volume growth across all commodity segments, higher productivity and improved efficiency levels, particularly at Freight Rail -Transnet’s biggest operating division. Freight Rail moved an unprecedented 201 million tons (mt) of freight, a 10,4% increase compared to the previous year –- the highest tonnage moved in Transnet’s history. This performance includes a significant improvement in the number of trains operated per day. In October 2011, we ran the highest number of trains per day at 1 444, from about 800 trains per day in the previous period.
General freight volumes rose 9,9% to 81,0mt from 73,7mt in the previous financial year, while containers on rail increased 21,5% to 762 760 twenty-foot equivalent units (TEUs) from 627 825 TEUs, indicating a growth in market share and significant strides in taking rail-friendly cargo off our roads.
Export coal volumes increased by 8,8% to 67,7mt from 62,2mt, while iron ore volumes jumped by an impressive 13,2% to 52,3mt from the previous year’s 46,2mt. Both heavy haul lines achieved record weekly throughput (productivity) levels of 1,7mt and 1,2mt, respectively. Our new railways operating strategy is beginning to pay off, with on-time departures and arrivals for General Freight Business improving by 18,9% and 17,7%, respectively, compared to the previous year.
Freight Rail’s performance during the year confirms the effectiveness of our focused interventions, including revising the operating division’s philosophy, reinstating scheduled railway, introducing more certainty at top leadership levels and boosting employee morale. Group revenue for the year increased by 20,9% to R45,9 billion from R38,0 billion in the previous period, mainly due to growth in volumes in the general freight, export coal, export iron ore and container volumes as well as an 18,0% improvement in productivity.
Elsewhere in the business, our rolling stock maintenance and manufacturing unit, Rail Engineering’s external revenue was up by an impressive 123,4% to R1,5 billion from R661 million previously. The increase was due to higher sales of coaches to the Passenger Rail Agency of South Africa (PRASA) as well as growth in locomotive and wagon sales into the African market, where we expect significant growth opportunities.
The operating division, which recently completed the manufacturing of 200 wagons for Rio Tinto’s Mozambique operations, offers the best opportunities for us to expand into the rest of the African continent. At the ports, Port Terminals continued to boost its efficiency levels with average moves per gross crane hour (GCH) increasing by 8,1% to 26,6 GCH from 24,6 GCH in the previous period. In addition, average tons loaded per hour at the Saldanha iron ore terminal improved by 4,1% to 7 242 tons per hour, and the Richards Bay dry bulk terminal’s loading rate was up 2,7% to 678 tons per hour.
We also celebrated the official opening of the Port of Ngqura, just outside Port Elizabeth in the Eastern Cape. This, we plan to develop into a transshipment hub for the Southern Africa region. Pipelines celebrated the successful commissioning of the Kendal – Waltloo, Jameson Park – Alrode and Alrode – Langlaagte sections of the New Multi-Product Pipeline on 31 May 2011. During the year, the southern portion of the 16-inch pipeline network transported in excess of 990 million litres of fuel, while over 275 million litres were moved in the northern section.
The 24-inch trunk-line from Durban to Jameson Park started operating in January 2012 and carried over 348 million litres of diesel for the year ended March 2012. All construction activity on the NMPP is expected to be completed by December 2013. As a consequence of the solid operational performance across the company, our key measure of profitability, earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 19,8% to R18,9 billion from last year’s R15,8 billion. This was in spite of a 21,8% increase in operating costs to R27,0 billion from R22,2 billion in the previous period.
The main drivers of the higher expenses were a 46,4% increase in material costs, an 18,8% increase in personnel costs as well as a 31,4% jump in energy prices. These increases were in line with our rising activity levels accompanied by higher maintenance costs to support volume growth, costs of improving safety in the workplace – a key priority – as well as higher electricity tariffs and fuel price increases.
Encouragingly, improved operational performance in our operations was accompanied by increased employment – a key priority in Government’s economic growth objectives. During the period, we increased our employee numbers by 3 159 people mainly to support Transnet’s investment and operational activities. In addition, our activities resulted in the creation of 27 964 new jobs in supplier-related industries across the economy.
One of the key focus areas for the year was safety, especially of our colleagues. In that respect, Transnet has recorded significant improvements. The disabling injury frequency rate (DIFR) – an internationally accepted standard of measuring safety in operations – improved to 0,65 from 0,82 during the previous period. The focus on safety of our assets resulted in a 35,8% reduction in the number (and severity) of loss incidents from 1 652 to 1 060. The total cost of these incidents was reduced by a significant 60,3% to R432 million compared with R1,1 billion in the previous period.
Sadly, we lost seven colleagues in our operations during the year – four of these colleagues were lost as a result of road accidents. We are encouraged by the drop in these numbers, but it is still way below our self-imposed target of zero fatalities. Most of these incidents can be avoided and we have in place several awareness initiatives to ensure adherence to standard operating procedures.
Capital investment for the year increased to a record R22,3 billion (excluding capitalised borrowing costs) with R11,6 billion being invested in capacity expansion and R10,7 billion in maintenance of existing capacity. The year’s investment lifts the total amount spent over the last seven years to R115,5 billion. Including the R1,2 billion part payment for the acquisition of the former Durban International Airport site from the Airports Company of South Africa, the total capital investment for the year is R23,5 billion – a 9,3% improvement on last year’s R21,5 billion.
Transnet has committed to invest R31,2 billion in the current financial year as part of its Market Demand Strategy – the company’s R300,1 billion investment programme over the next seven years. This includes the acquisition of more than 1 200 locomotives for Freight Rail, 1 064 of these locomotives are to be deployed in GFB. Transnet’s capital investment programme is supported by a comprehensive funding strategy and over the year under review, the company raised R11,1 billion from various funding sources including commercial paper, domestic bonds, the French Development Bank and bank loans.
We are confident that the company will be able to raise the R14,1 billion funding requirement for the current year. The gearing ratio was up to 42,1% at year-end compared to 41,1% over the same period last year, but still comfortably within the 50% ceiling which we do not expect to breach. It is even more encouraging that the cash interest cover ratio improved to 4,2 times from last year’s 3,9 and significantly above our target of three times, thanks to our operations’ strong and sustainable cash generating ability. The latter rose by 27,6% to R20,6 billion, aided by better collections and inflows due to improved working capital management and a 7,5 cents a litre security of supply levy for Pipelines.
Transnet’s total recognised broad-based black economic empowerment (B-BBEE) spend as per the Department of Trade and Industry Codes, rose to R25,8 billion or 80% of total measurable procurement spend of R32,2 billion. We view Transnet’s massive operational and capital expenditure spend as our biggest contributor to empowerment. To that end, we insist on compliance to the Department of Public Enterprises-led Competitive Supplier Development Programme (CSDP) which focuses on skills development and job creation among others, as it drives localisation of manufacturing of heavy equipment and machinery.
During the year, Transnet acquired 43 locomotives from the United States’ General Electric. The agreement included CSDP obligations of 65% of the total value of the contract – up from 25% in the previous agreement for the purchase of 100 locomotives from the same supplier. Transnet has since shifted to include port-handling equipment in its CSDP programme. The following key port-handling equipment transactions were concluded during the year: Seven tandem lift cranes; six mobile harbour cranes; 28 straddle carriers; one pneumatic ship un-loader; one ship loader; 33 haulers and eight reach stackers. The total contract value since the inception of the CSDP amounts to R14,1 billion. To date, R3,0 billion or 55,0% of total supplier development obligations have been executed.
Edited by: Creamer Media Reporter
Other Announcements News
Updated 7 hours ago
Tests conducted on Jumo’s EM panel-mount thermostat range to determine the service life proved the outstanding durability of these units. After 5.3 million switching operations at an average of one per minute, none of the 10 devices with a temperature controller...
Updated 7 hours ago
The oil industry remains remarkably male-dominated, with comparatively few women coming through higher education with the required science and engineering skills. Bucking the trend, leading fuel company Engen Petroleum channels considerable investment into female...
Updated 7 hours ago
Riverbed Technology, the leader in application performance infrastructure, announced the availability of Riverbed SteelCentralTMAppInternals 9.0 rvbd.ly (formerly OPNET AppInternals Xpert), enabling IT teams to isolate problems faster, gain increased visibility...
The Medupi power station project
Updated 5 hours ago
Electricity producer Eskom has, for the first time, offered a detailed timeline for the synchronisation of Medupi Unit 6, which is officially scheduled for December 15, 2014.
Addressing a joint meeting of the Portfolio Committees on Public Enterprises and Energy on...
Updated 5 hours ago
As South Africa had largely exhausted the use of traditional mechanisms to stimulate the fiscus, government now needed to swing its focus to dealing with the internal structural issues that had, thus far, prevented the country from unlocking its true economic value,...
Updated 5 hours ago
The Western Cape High Court will on Monday hear a Sanral application for information about the proposed N1/N2 Winelands Toll Highway Project to be kept secret, the City of Cape Town said. The application would be heard behind closed doors, mayoral committee member...
Recent Research Reports
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
Real Economy Insight: Road and Rail 2014 (PDF Report)
This six-page brief covers key developments in the road and rail industries over the past 12 months, including details of South Africa’s road and rail network and prospects for both sectors.
Real Economy Insight: Steel 2014 (PDF Report)
This four-page brief covers key developments in the steel industry over the past 12 months. It provides an overview of the global and South African steel and stainless steel markets, South Africa’s major steel producers and events that have shaped these markets.
This Week's Magazine
Multinational semiconductor chipmaker corporation Intel announced its national campaign to further acquire partners to drive its She Will Connect programme, an initiative that aims to expand digital literacy skills to young women in developing countries, further into...
South Africa's MeerKAT radio telescope array programme should get back on schedule within a few months. This assurance has been given by SKA South Africa (SKA SA) associate director: science and technology Prof Justin Jonas. Early last month, Science and Technology...
The Passenger Rail Agency of South Africa’s (PRASA’s) Metrorail service will remain a subsidised service following its current multibillion-rand rolling stock, station, depot and signalling upgrade programme. PRASA group CEO Lucky Montana has allayed fears that...
Contaminated Land Provisions in the National Environmental Management: Waste Act No 59 of 2008 will open the door for court battles to determine who will be held liable for the remediation
The uncertainties around the remediation of affected areas as addressed in the Contaminated Land Provisions in the National Environmental Management: Waste Act No 59 of 2008 will possibly spark litigation and disputes between landowners and businesses, contractors...
South Africa is currently the largest component of the African Development Bank’s (AfDB’s) active portfolio in Southern Africa, comprising 62.5% of the bank’s $7.9-billion exposure to the 12-country region – the second largest beneficiary is Mauritius, which...