Financial Results Presentation 31 March 2018 Executive summary - PowerPoint PPT Presentation

Financial Results Presentation 31 March 2018

Executive summary Revenue increased by 11,3% to R72,9 billion,  Net profit for the year increased by 75,4%  Capital investment of R21,8 billion,  driven by: to R4,9 billion (2017: R2,8 billion), a bringing expenditure over the past six a 6,5% increase in railed automotive and  significant increase from the prior year. years to R165,6 billion. container volumes; a 4,3% increase in railed export coal  volumes; and 2,9% of personnel costs invested in  a 6,1% increase in port container  Gearing improved by 0,8% to 43,4%  training, focusing on: volumes. and cash interest cover at 3,0 times, Artisans;  are both comfortably within loan Engineers; and  covenant requirements. Engineering technicians.  Operating expenses increased by 6,5% to  R40,4 billion. Savings of R3,1 billion were achieved against Cash generated from operations   B-BBEE spend amounted to R25,8 billion  increased by 12,6% to R34,9 billion. planned costs. or 86,9% of total measured procurement spend, per DTI codes. EBITDA increased by 18,0% to R32,5 billion,  The Company recorded a DIFR ratio of  with the EBITDA margin increasing from 0,73 – the seventh consecutive year 42,1% to 44,6%. that a ratio below 0,75 has been achieved with the global benchmark of 1,0. TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 2

Five-Year review + Volumes + Financial ratios • The launch of the Transnet Africa Locomotive during April 2017 marked a crucial step in its strategy of becoming a leading manufacturer and supplier of rolling stock on the African continent. • The locomotive, designed, engineered and manufactured in Africa, is suitable for use on branch lines and in the yard for shunting, while also being able to travel on old rail tracks originally designed to carry light axle loads. • In addition, the diesel-powered Trans- Africa Locomotive is appropriate for aged railway lines that operate on the Cape Gauge system, offering a cost-effective solution for the majority of the continent’s railway lines that are currently unused. TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 3

5-Year review 2014 2015 2016 2017 2018 % VARIANCE* VOLUMES General freight (GFB) (mt) 88,0 90,6 84,0 88,1 90,8 3,2 Export coal (mt) 68,1 76,3 72,1 73,8 77,0 13,1 Export iron ore (mt) 54,3 59,7 58,1 57,2 58,5 7,7 Total rail 210,4 226,6 214,2 219,1 226,3 7,6 Containers (TPT) ('000 TEUs) 4 503 4 571 4 366 4 396 4 664 3,6 Petroleum (M ℓ ) 16 583 17 186 17 426 16 978 16 345 (1,4) FINANCIALS Revenue (including claw back) 56 606 61 152 62 167 65 478 72 887 28,8 EBITDA (including claw back) 23 639 25 588 26 250 27 557 32 515 37,5 Capital investment 31 766 33 565 29 561 21 438 21 781 (31,4) ** Total assets 240 073 328 439 356 393 353 139 369 823 54,0 Total borrowings 90 444 110 377 134 517 124 780 122 550 35,5 RATIOS/STATISTICS EBITDA margin (%) 41,8 41,8 42,2 42,1 44,6 Gearing (%) 45,9 40,0 43,1 44,2 43,4 Cash interest cover (times) 3,7 3,6 3,1 2,9 3,0 * Absolute comparison to 2014. ** Decrease due to value engineering and optimisation efforts. TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 4

Summary financial performance + Actual performance + Revenue and volumes + Net operating expenses + Earnings before interest, taxation and depreciation (EBITDA) + Depreciation, impairment and finance costs + Property, plant and equipment + Total borrowings, gearing and cash interest cover + Abridged cash flow statement • The fully autonomous safety inspection device (SID) prototype – one of a kind globally - is used and tested by Transnet to detect: • Obstacles such as livestock or humans; • Defects on the track in front of trains; and • Cable theft or overhead traction issues. • A cow-catcher at the front removes small obstacles on the track, like stones. • Six engineers spent 18 months developing the concept and working on the prototype in collaboration with the CSIR. TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 5

Actual performance Mar 2018 vs prior year March 2018 volume growth (%) vs prior year Weighted group volume performance +6,5% 6,1 3,3 Revenue excluding clawback +10,0% Revenue including clawback +11,3% (3,7) EBITDA excluding clawback Rail Ports Pipelines +14,8% Pipelines volumes lower than prior year due mainly to a customer EBITDA including clawback +18,0% shutdown, and lower market demand. Depreciation +1,6% Mainly due to a decrease in borrowing costs capitalised and the Finance cost +12,9% impact of the credit rating downgrade. Capital investment +1,6% Cash interest cover (times)*# +0,1 * Absolute variance. Gearing* #Excluding working capital changes. (0,8%) TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 6

Revenue and volumes Rail volumes (mt) Revenue* (R million) +11,3% +3,3% 226,3 72 887 219,1 65 478 General freight +3,1%* 90,8 88,1 Export coal +4,3%* 77,0 Export iron ore +2,3%* 73,8 57,2 58,5 2017 2018 2017 2018 Port containers (‘000 TEUs) Resilient performance and above expectations in an economy showing signs of recovery. +6,1% 4 396 4 664 Revenue contribution by core Operating Division** (%) TPL 5 TPT 2017 2018 15 Petroleum (mℓ) -3,7% 16 978 16 345 52 TFR 14 TNPA 14 2017 2018 TE * Including clawback. * Variance % prior year. ** Excludes specialist units and intercompany eliminations. TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 7

Net operating expenses Net operating expenses (R million) Net operating expenses contribution by cost element (%) +6,5% 18 40 372 37 921 Personnel costs 7 Electricity costs Fuel costs 58 7 Material and maintenance Other operating expenses 10 2017 2018 Net operating expenses 6,5% Cost-optimisation initiatives: R3,1 Rationalising overtime, reducing professional and consulting • Represent in costs in line with higher volumes, with resultant increases of: billion fees; 75% of 12,8% in personnel, 13,6% in fuel and 5,7% in electricity costs. against Rolling out programmes to measure condition-assessment • operating planned versus time-based maintenance execution; and expenses costs Limiting discretionary costs relating to travel, printing, • stationery and telecommunications. TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 8

EBITDA EBITDA (R million) EBITDA contribution by core Operating Division (%) TPL** +18,0% 9 32 515 TPT 27 557 12 59 TFR TNPA** 21 2017 2018 EBITDA margin (%) -1 TE * +2,5% 44,6 42,1 EBITDA growth of 18,0% , with EBITDA margin increasing from 42,1% to 44,6% . Regulated entities represent 30% of Group EBITDA. 2017 2018 ** Regulated entities. * Absolute variance. TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 9

Depreciation, impairment and finance costs Depreciation, derecognition and amortisation (R million) +1,6% Depreciation, derecognition and amortisation of assets by 1,6% 13 686 13 471 Due to: The revaluation of property, plant and equipment, partially offset by: • A significant decrease in derecognition costs. • 2017 2018 Impairment of assets (R million) -43,2% Impairment of assets of R1,4 billion Due to: 2 538 The impairment of property, plant and equipment (derailments and • 1 442 index valuation impairments on port operating assets). Impairment of trade and other receivables. • 2017 2018 Finance costs (R million) +12,9% Finance costs by 12,9% , 10 211 9 045 Due to: Lower capitalisation of borrowing costs. • Increased cost of borrowings impacted by the credit rating downgrade. • 2017 2018 TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 10

Property, plant and equipment Property, plant and equipment (R million) PPE by 7,0% to R335,5 billion +7,0% Due to: Capital investment of R21,8 billion. • 11 678 ̶ Expansion: R5,4 billion. ̶ Sustaining: R16,4 billion. 2 933 335 488 21 781 R165,6 billion invested in the past six years. (1 032) • (13 303) Transnet is seeking new growth paths to compensate for a lower growth • phase in traditional markets. 313 431 2017 Additions Reval. Deprec. Borrowing Impairment 2018 costs and other Return on total average assets (%)** * +1,3% Return on total average assets of 5,9% 5,9 4,6 Represents an absolute of 1,3% compared to the prior year, mainly due • to a 33,7% increase in operating profits. 2017 2018 * Absolute variance. ** Excluding capital work in progress and Regulator claw backs. TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 11