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

Financial Results Presentation 31 March 2018

TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 2

Executive summary

 Revenue increased by 11,3% to R72,9 billion, driven by:

• a 6,5% increase in railed automotive and

container volumes;

• a 4,3% increase in railed export coal

volumes; and

• a 6,1% increase in port container

volumes.  Operating expenses increased by 6,5% to R40,4 billion.  Savings of R3,1 billion were achieved against planned costs.  EBITDA increased by 18,0% to R32,5 billion, with the EBITDA margin increasing from 42,1% to 44,6%.  Net profit for the year increased by 75,4% to R4,9 billion (2017: R2,8 billion), a significant increase from the prior year.  Gearing improved by 0,8% to 43,4% and cash interest cover at 3,0 times, are both comfortably within loan covenant requirements.  The Company recorded a DIFR ratio of 0,73 – the seventh consecutive year that a ratio below 0,75 has been achieved with the global benchmark of 1,0.  Cash generated from operations increased by 12,6% to R34,9 billion.  Capital investment of R21,8 billion, bringing expenditure over the past six years to R165,6 billion.  2,9% of personnel costs invested in training, focusing on:

• Artisans;
• Engineers; and
• Engineering technicians.

 B-BBEE spend amounted to R25,8 billion

• r 86,9% of total measured procurement

spend, per DTI codes.

TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 3

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,

• ffering 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 4

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 (Mℓ) 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 5

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 6

Actual performance

* Absolute variance. #Excluding working capital changes. Pipelines volumes lower than prior year due mainly to a customer shutdown, and lower market demand. March 2018 volume growth (%) vs prior year 3,3 6,1 (3,7) Rail Ports Pipelines Mar 2018 vs prior year Weighted group volume performance

+6,5%

Revenue excluding clawback

+10,0% +18,0%

Depreciation

+1,6%

Capital investment

+1,6%

Cash interest cover (times)*#

+0,1

Gearing*

(0,8%)

Finance cost

+12,9% +11,3%

Revenue including clawback EBITDA excluding clawback

+14,8%

EBITDA including clawback Mainly due to a decrease in borrowing costs capitalised and the impact of the credit rating downgrade.

TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 7

Revenue and volumes

* Including clawback. ** Excludes specialist units and intercompany eliminations. Revenue* (R million)

65 478 72 887

+11,3% 2018 2017 * Variance % prior year. Rail volumes (mt) Port containers (‘000 TEUs) Petroleum (mℓ)

4 396

2017 +6,1% 2018

16 345

• 3,7%

2018 2017 Revenue contribution by core Operating Division** (%) TE 14 TNPA 15 52 TFR 14 5 TPT TPL 77,0 2018 226,3 +3,3% 58,5 57,2 219,1 90,8 88,1 2017 73,8 Export coal +4,3%* Export iron ore +2,3%* General freight +3,1%* Resilient performance and above expectations in an economy showing signs of recovery.

4 664 16 978

TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 8

Net operating expenses (R million) Net operating expenses contribution by cost element (%) Net operating expenses 6,5% in costs in line with higher volumes, with resultant increases of: 12,8% in personnel, 13,6% in fuel and 5,7% in electricity costs. Cost-optimisation initiatives:

• Rationalising overtime, reducing professional and consulting

fees;

• Rolling out programmes to measure condition-assessment

versus time-based maintenance execution; and

• Limiting discretionary costs relating to travel, printing,

stationery and telecommunications. Represent 75% of

• perating

expenses R3,1 billion against planned costs

Net operating expenses

18 7 7 10 58 Other operating expenses Material and maintenance Fuel costs Electricity costs Personnel costs

40 372 37 921

+6,5% 2018 2017

TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 9

EBITDA

EBITDA contribution by core Operating Division (%) EBITDA growth of 18,0%, with EBITDA margin increasing from 42,1% to 44,6%. EBITDA (R million) EBITDA margin (%) * * Absolute variance. TE 12 TNPA** 21 TFR 59 TPL** 9 TPT ** Regulated entities.

32 515 27 557

2018 +18,0% 2017 Regulated entities represent 30% of Group EBITDA. 42,1 2017 2018 +2,5% 44,6

• 1

TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 10

Depreciation, impairment and finance costs

Depreciation, derecognition and amortisation (R million) Finance costs (R million) Impairment of assets (R million)

Depreciation, derecognition and amortisation of assets by 1,6% Due to:

• The revaluation of property, plant and equipment, partially offset by:
• A significant decrease in derecognition costs.

Impairment of assets of R1,4 billion Due to:

• The impairment of property, plant and equipment (derailments and

index valuation impairments on port operating assets).

• Impairment of trade and other receivables.

Finance costs by 12,9%, Due to:

• Lower capitalisation of borrowing costs.
• Increased cost of borrowings impacted by the credit rating downgrade.

13 686 13 471

2017 +1,6% 2018

1 442 2 538

2017 2018

• 43,2%

10 211 9 045

+12,9% 2017 2018

TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 11

Property, plant and equipment (R million) Return on total average assets (%)** PPE by 7,0% to R335,5 billion Due to:

• Capital investment of R21,8 billion.

̶ Expansion: R5,4 billion. ̶ Sustaining: R16,4 billion.

• R165,6 billion invested in the past six years.
• Transnet is seeking new growth paths to compensate for a lower growth

phase in traditional markets. Return on total average assets of 5,9%

• Represents an absolute of 1,3% compared to the prior year, mainly due

to a 33,7% increase in operating profits. *

Property, plant and equipment

2 933 11 678 21 781

(13 303) Reval. Additions 2017 313 431 +7,0% 2018 335 488 Impairment and other (1 032) Borrowing costs Deprec. +1,3% 5,9 2018 2017 4,6 * Absolute variance. ** Excluding capital work in progress and Regulator claw backs.

TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 12

The gearing ratio by 0,8%.

• Below the target range of <50,0%.
• Well below the triggers in loan covenants.

The gearing ratio not expected to exceed the target ratio over the medium-term. Long-term borrowings raised of R9,9 billion, without government guarantees and net short-term facilities accessed of R3,4 billion. The Company borrows on the strength of its financial position and has maintained an investment-grade credit rating for its stand-alone credit profile. Reflects available capacity to continue the investment strategy, aligned to validated demand.

Total borrowings and cash interest cover

Gearing (%) Total borrowings (R million) Cash interest cover (times)

122 550 124 780

2017 2018

• 1,8%

* 2017

• 0,8%

2018 44,2 43,4 +0,1 2018 3,0 2017 2,9 * Absolute variance. Transnet’s strong cash-generating capability resulting in CIC of 3,0 times which is higher than the triggers in loan covenants of 2,5 times. *

TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 13

Abridged cash flow statement

Credit rating as at 31 March 2018 Foreign currency Baa3/stable outlook BB/stable outlook Local currency Baa3/P-3/stable

• utlook

BB+/stable outlook Stand-alone credit profile bbb- baa3/stable outlook

2018 2017 % var R million R million Cash flows from operating activities 22 958 25 104 (8,5) Cash generated from operations 34 915 31 018 12,6 Changes in working capital (2 161) 1 747 >(100,0) Other operating activities (9 796) (7 661) 27,9 Cash flows utilised in investing activities (24 891) (24 689) 0,8 Cash flows utilised in financing activities (109) (7 936) (98,6) Net decrease in cash and cash equivalents (2 042) (7 521) (72,8) Cash and cash equivalents at the beginning of the year 6 422 13 943 (53,9) Total cash and cash equivalents at the end of the year 4 380 6 422 (31,8) Borrowings raised 2018 R billion Development finance institutions 3,5 Export credit agencies 2,8 Bank loans 2,5 Domestic bond issue 1,1 Total long-term borrowings raised 9,9 Net short-term facilities accessed 3,4

TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 14

Capital investment

+ Capital investment analysis + Major capital deliveries

• DCT Pier 2 deployed 23 new Kalmar straddle carriers

assembled locally, marking Transnet’s commitment to localisation and industrialisation of the country.

• The substantial capital investment of nearly R308 million will

increase the number of reliable straddle carriers available to

• perations and lower the cost of maintenance due to less

equipment failures.

• TPT has sought the services of a global and leading cargo

handling maker, Kalmar, an original equipment manufacturer (OEM), to supply a substantial portion of the sub-assembled components for specialised cargo handling equipment of this nature through Transnet Engineering.

• Phase 1 of the Manganese Rail project is complete and in
• peration.
• Maydon Wharf Berths were reconstructed to allow bigger

vessels to berth.

• Transnet achieved multi-product operations of the NMPP in

August 2017.

TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 15

Capital investment (R billion) Capital investment by

• perating segment

Expansion vs replacement Capital investment by commodity 3% 2% 7% 4% 77% 2% 4% 1% Manganese Iron ore Coal Piped products Automotive and other General freight Bulk and break bulk Maritime containers 7% 11% 81% Engineering and other Pipelines Ports Rail 75% 25% Replacement R16,4 billion. Expansion R5,4 billion. * CAGR from 2013 to 2018. *

Capital investment analysis

2014

• 4,5%

2016 2017 33,6 2018 29,6 2015 2013 27,5 21,4 21,8 31,8 Although capital investment has declined, the objective of providing capacity aligned to validated demand has been achieved, with R165,6 billion invested over the past 6 years. Transnet deferred certain non-critical capital investment due to the credit rating downgrades which caused a climate of restrained and more costly funding. 1%

TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 16

* Cumulative since inception of contracts. Asset type 2018 Port equipment

Haulers 33 Trailers 9 Straddle carriers 23 Workshop forklift 3 Reach stackers 7 Tugs 7

Major capital deliveries

Asset type FY 2018 Cumulative 2018* Locomotives

233 class 44 diesel 86 203 359 class 22 electric 88 168 232 class 45 diesel 21 21 240 class 23 electric 10 10

Wagons

GFB 450 Iron ore 232

Asset type 2018 Rail refurbishment: Infrastructure

Turnouts (units) 30 Universals (units) 54 Rail (kilometers) 320 Screening (kilometers) 160 Sleepers (units) 349 786

Pipeline infrastructure

Coastal terminal phase 1A 96% NMPP main trunk line 100% Coastal terminal (tight-line operations) 100% Inland terminal phase 1A 100%

• The programme achieved multi-product operations in August 2017.

Asset type Stage of completion Rail infrastructure

Waterberg rail Stage 1 complete and in operation Manganese rail Phase 1 complete and in operation

Port infrastructure

Reconstruction of Maydon Wharf berths Complete Port of Ngqura new administration building Complete

TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 17

+ Rail – Export coal + Rail – Export iron ore + Rail – General Freight Business + Ports containers + Pipelines

• The Sishen–Saldanha railway line, also known as the Iron

Export Line, is an 861 kilometres (535 miles) long heavy haul railway line.

• It connects iron ore mines near Sishen in the Northern

Cape with the port at Saldanha Bay in the Western Cape. It is used primarily to transport iron ore and does not carry passenger traffic.

• Train lengths have been increased to 342 wagons,

employing Radio Distributed Power (RDP) technology. These trains have 8 locomotives, a mix of electric and diesel- electric, and 342 wagons with a total mass of 41 400 tonnes and are 3,8 kilometres long.

• This is the longest production train in the world.

Volumes and

• perations

TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 18

Volumes (mt) Productivity and efficiency Rail – Export Coal Export coal volumes:

• by 4,3% from the prior year.
• Improved performance in response to

strong customer demand.

• This achievement includes a monthly

record throughput of 7,2mt in the month

• f September 2017.

Improvement initiatives include:

• Continued high level engagement to

address network disruptions due to community unrest;

• Additional foot-patrols inspecting hotspot

areas during severe weather conditions to avoid possible incidents;

• Customer engagement on stockpile levels

to optimize wagon allocation; and

• Continuous improvement of operational

efficiencies through lean six sigma programme deployment.

Cycle time (hours)

Volumes and operations

+4,3%

2018 77,0 2017 73,8 2016 72,1 2013 69,2 2015 76,3 2014 68,1

• 1,7%

62,6 2018 2017 63,7

TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 19

Volumes (mt) Productivity and efficiency Rail – Export Iron Ore Export iron ore volumes:

• by 2,3% from the prior year.
• Improved performance in response to

increased demand. This was partially offset by:

• Adverse weather conditions; and
• Derailments on the export iron ore line in

the fourth quarter. Improvement initiatives for the ensuing year include:

• Customer liaison on product availability

and resource allocation; and

• Cycle time improvements through lean six

sigma programme initiatives.

Cycle time (hours)

Volumes and operations

Volumes and operations (Cont.)

2017 90,3

• 3,9%

86,8 2018

+2,3%

2018 58,5 2017 57,2 2016 58,1 2015 59,7 2014 54,3 2013 55,9

TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 20

Volumes (mt) Productivity and efficiency Rail – General Freight Business (GFB) GFB volume performance

• by 3,1% from the prior year.
• Improved operational efficiency and

productivity led to increased volumes.

• The container and automotive business

grew by 6,5%, suggesting continued success in market-share growth from the road-to-rail shift. Improvement initiatives for the ensuing year include:

• Continued implementation of

diversification & road to rail strategies;

• Maximizing rail delivery on commodities

with high demand; and

• Improving on wagon placement for

improved turnaround times.

Wagon turnaround time (days)

Volumes and operations (Cont.)

2017 88,1 2016 90,8

+3,1%

2018 88,0 2013 82,6 84,0 2015 90,6 2014

• 5,6%

10,1 2018 2017 10,7

TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 21

Ship turnaround time (hours)

Volumes (‘000 TEUs) Productivity and efficiency Port Containers The current year’s performance

• by 6,1% from the prior year.
• Better performance mainly due to

improved customer demand.

• Port productivity at Port of Durban

impacted significantly by severe storms and floods in October 2017 that damaged port infrastructure and equipment extensively. Improvement initiatives include:

• Intensive repairs and maintenance to

damaged infrastructure and port equipment in response to the unanticipated long recovery period from the October 2017 floods and storms;

• Maintenance of minimum work
• perations during adverse weather

conditions, in line with standard

• perating procedures;
• Optimal utilization of 23 new straddle

carriers; and

• Close liaison with shipping lines for

improved cargo handling plans (parcel sizes and stowage).

Volumes and operations (Cont.)

4 237 4 503 4 571 4 366 4 396 2017 2018

+6,1%

2014 2013 2015 2016 51 55 26 24 69 32 38

Cape Town Durban Pier 2 Ngqura Durban Pier 1 2017 2018

4 664

72

TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 22

Productivity and efficiency Port Containers

Train turnaround time (hours) Container moves per ship working hour

While train turnaround times at Durban Pier 1 and Pier 2 improved, performance at Cape Town and Ngqura declined marginally. Container moves per ship working hour (SWH) negatively impacted by:

• Shipping lines significantly changing their

vessel and parcel sizes, requiring adaptations in the allocation of available port resources; and

• Operations in the Port of Durban were

impacted by a severe storm in October 2017, which saw a significant amount of equipment being damaged (e.g. cranes & RTGs), temporarily reducing the terminals’

• perational capacity.

The terminals recovered from this incident and performance in the last quarter reflected significant improvement.

Volumes and operations (Cont.)

3,8 1,1 2,4 Durban Pier 1 2,9 3,5 Durban Pier 2 2,2 1,0 3,9 Ngqura Cape Town 53,0 Durban Pier 2 52,7 45,0 55,5 Durban Pier 1 45,5 Ngqura 49,5 63,0 Cape Town 44,8 2017 2018 2018 2017

TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 23

DJP + NMPP capacity utilisation (Mℓ/Week)

Volumes (bℓ) Productivity and efficiency Pipelines

Operating cost per Mℓ.km (Nominal R/Mℓ.km)

Petroleum volume performance

• 3,7% below the prior year.

Low performance was mainly due to a customer shutdown and lower market demand.

Planned vs actual delivery time (% of deliverables within 2 hours of plan) Ordered vs delivered volumes (% of deliveries within 5% of order)

Interventions

• Continue to maximise on available coastal

volumes;

• Optimise TM2 utilization; and
• Perform an assessment of the demand

intermodal study.

Volumes and operations (Cont.)

89 99 120 133 119 2014 2013 2017 2018 2016 2015 85,6 85,7 2016 2017 2018 86,0 2014 82,0 2015 84,0 99 98 96 93 2018 2017 2016 2015 2014 116,0 2017 115,0 2018 2016 110,0

2014 16,6 2015 17,2 2016 17,4 2017 17,0 2018 Actual 16,3

• 3,7%

2013 15,9

100 135

TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 24

Sustainable development

• utcomes

+ Safety + Human resources + Community development + Industrial capability building and transformation + ED initiatives + Environmental stewardship

• Two unique trains that operate as mobile healthcare

hospitals, bringing much needed medical and educational services to impoverished rural areas of South Africa.

• With over 40 permanent staff and numerous volunteers,

the train is more than a mobile hospital, it provides out- reach and educational programmes and has thus far reached 23,5 million people since it rolled out in 1994, which makes it the world’s biggest mobile clinic.

TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 25

Employee fatalities (number) The Company regrets to report five employee fatalities during the year (compared to fifteen in the prior year). The employee fatalities resulted from a combination of causes such as road vehicle accident and human behavior. Transnet’s leadership has heightened its oversight role of

• perational performance - and safety performance in particular – in

more visible ways through site-visits, and by instituting an integrated systems management approach to ensure the various levels of safety performance are clearly understood and adhered to within the organisation. The Company continues to analyse and review its current safety approach and efficiency, while proactively striving ‘towards zero harm’. Disabling injury frequency rate (DIFR) DIFR performance of 0,73 (tolerance: 0,75)

• This is the seventh consecutive year of recording a DIFR ratio

below 0,75 due to continued focus and investment in safety. The Company continues to monitor and mitigate, as best as is possible, considering both operational and behavioural risks that are inherent in a Transnet work environment.

Safety – the seventh consecutive year recording a DIFR ratio below 0,75

0,69 2014 0,69 0,69 2017 0,73 2018 2016 2015 0,69

5 15 8 4 7

2014 2015 2016 2018 2017

TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 26

Human resources – Employment, transformation, skills development

* Including contract employees. Invested 2,9% of the labour cost bill on skills development initiatives (focusing on operational and technical training). Transnet achieved its targets for 2018 in most critical skills development areas, that were the focus for the year. Schools of Excellence in Transnet continued to be a great flagship of the Transnet Academy’s delivery. 55 666 Transnet employees* A representative workforce. Designated categories Target % Actual % 2018 2018 Black 88,0 86,1 Females at GLT 50,0 36,4 Females at extended GLT 50,0 39,7 Females below extended GLT 29,7 28,4 People with disability (PWD)’s 3,1 2,4 Skills development, capacity building and job creation Key performance indicator Unit of measure Annual target Actual 2018 Training spend % of personnel costs Rand million ≥ 3,5 2,9 741 Engineering trainees Number of learners ≥ 100 100 Technician trainees Number of learners ≥ 200 201 Artisan trainees Number of learners ≥ 200 202 Sector specific trainees Number of learners ≥ 955 1 516 Transnet has performed well in relation to its employment equity targets. For black employees, Transnet had set a stretch target after having achieved the National Economically Active Population target. With the formation of the Transnet PWD forum, various initiatives related to PWDs have received traction. Female representation is growing steadily despite significant challenges in an operations-heavy environment at semi and unskilled levels but the recruitment and retention of women is receiving significant attention.

TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 27

Community development – Transnet Foundation invested R219 million in corporate social investment.

Heritage preservation Managing Transnet heritage assets for future generations.

• Four locomotives were

relocated to Bloemfontein for restoration.

• The museums in George and

Kimberley continue to demonstrate the role played by rail in the historic development

• f the South African economy.

Employee volunteer programme (EVP) and socio-economic infrastructure development (SEID)

• Employees volunteered at the

De Aar Youth Precinct to work with local youth.

• Idondotha Community Centre is

60% complete.

• ESD centre at Empageni is

complete and the community centres at Khuma, Thokoza, Ireagh and Springs provided social services to 45 989 clients.

• 152 poor households were

recipients of food-garden produce.

• 4 148 motorists and

pedestrians have been reached through rail safety programmes. Sports SAFA/Transnet Football School

• f Excellence
• Will soon be converted to a

fully-fledged Transnet Soccer Academy.

• The current rural and farm

sports programme reached 50 000 learners through programmes promoting chess, athletics, soccer, netball and basketball. Healthcare Access to primary health care services for rural communities. Transnet-Phelophepa I&II.

• 157 418 patients assisted
• n-board.
• 435 332 individuals assisted

through outreach services.

• 7 647 girls and 2 385 boys

through packaged health services.

• Mass cancer and diabetes

campaigns were intensified. Education Looks after orphaned and vulnerable youth in communities where Transnet has large projects

• r operations.
• Completed the King Zwelithini

primary school library.

• A national programme is

underway to audit teachers’ skills to support the 2019 teacher development programme.

TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 28

Broad-based black economic empowerment (B-BBEE) and local supplier industry development Transnet is currently rated as a Level 2 B-BBEE contributor Supplier development (SD) programme (R million) % B-BBEE spend of TMPS* B-BBEE categories spend % of TMPS *

Industrial capability building and transformation

* TMPS – Total measurable procurement spend. ** B-BBEE spend down due to certain large suppliers being impacted by the introduction of the new codes. ̂^Absolute variance. +2% Total contract value 137,619 134,365 2018 2017 +1% Committed SD obligation 63,403 62,564 +32% Actual SD obligation delivered 42,479 32,246

87 103 101 105 94 88 80 75 65 59

2018 2017 +4% 2013 2014 2015 2016 2012 2011 2010 2009 ** Emerging enterprises 8 9 +1%^ +18%^ Qualifying small enterprises 0%^ +8%^ 8 Black owned 8 13 Black woman owned 42 34 31 2018 2017

TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 29

ED initiatives

Junior Achievement South Africa (JASA) Be Bold Entrepreneurial Youth Programme South African Bureau of Standards (SABS) GODISA Fund R4,5 million spend since inception R1,5 million spend in the current year. Completed in 2018 R30 million spend since inception in 2014 to date. Fund capitalised at R165 million for 10 years with an equal contribution of R55 million from each partner. A School programme that provides entrepreneurship skills to high school students with five academies in Eastern Cape, Northern Cape, Free State and North West. The Programme develops youth in terms

• f entrepreneurship and innovation for

the transport and logistics industry. An incubation programme designed to assist black-owned SMMEs with design, research and development skills. A partnership with SEFA and Anglo to provide financial assistance to existing suppliers.

• Ten candidates from the Moving Ideas

competition have progressed into the Business Support programme.

• The top 10 SMMEs to be on the

programme.

• The 17 rural universities have been

identified and associations have been set up.

• Application for communication with

societies is running.

• 110 EMEs and start ups assisted, nine

individuals assisted and 83 beneficiaries in ideation.

• R150 million allocated to financial

assistance and R15 million for non- financial assistance.

• R49 million worth of loans have been

approved, out of which R47 million has been disbursed.

TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 30

ED initiatives (Cont.)

GIBS Programme Shanduka Black Umbrellas Matlafatso Centre – Wits Furntech R19 million spend since inception in 2014 to date. R31 million spend since inception in 2013 to date. The project has been completed in the current year. R18 million spend since inception in 2014 to date. To be completed in 2018. R3,5 million spend since inception in 2014 to date. An incubation for the Systems Engineering and Research Centre. A business incubation and mentorship programme aimed at assisting black-owned SMMEs with business skills in Port Elizabeth and Richards Bay. Financial and non-financial assistance for black disabled youth to manufacture furniture in Limpopo. A mini MBA to equip black-

• wned SMMEs with

entrepreneurial skills.

• 110 EMEs and start ups

assisted, 9 individuals assisted and 83 beneficiaries in ideation.

• Two incubation centres are currently

running in Richards Bay, and Port Elizabeth.

• An intensive mentorship drive was

initiated during the period and an improvement in business maturity and literacy rate has been noted.

• This initiative is focused specifically on

black people living with disabilities.

• 25 beneficiaries have been trained and

the second phase has commenced.

• Aims to empower new and existing

growth-oriented entrepreneurs.

TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 31

Energy consumption and efficiency Carbon emissions

Environmental stewardship Energy efficiency and carbon emissions reduction

Total electricity consumption (GW/h) Total fuel consumption (million litres) Carbon emissions intensity (kgCO2e/ ton) Carbon emissions (mtCO2e) Total energy efficiency (ton/GJ) Traction electricity efficiency (gtk/kWh) 3 208 3 296 +2,7% 2018 2017 +2,9% 2018 239,0 246,0 2017 2018 65,4 64,5 2017 2017 18,9 2018 19,0 +0,9% 2017 2018 10,34 10,09

• 2,4%

2017 2018 3,95 4,00 +1,3% Freight commodities market share gains from road hauliers resulted in carbon emissions savings to the South African transport sector of 859 228 tC02e. 262 016MWh electricity regenerated by the new 15E, 19E, 20E and 21E locomotives. tC02e - tons of carbon dioxide equivalent. GWh - Gigawatt hours. GJ – Gigajoule. Gtk - gross ton km. Traction fuel efficiency (gtk/kWh) 207,9 213,4 +2,6% 2018 2017

• 1,5%

TRANSNET AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2018 32

Conclusion

 Transnet continues to improve performance year on year in an economy showing signs of recovery, confirmed by an 18,0% increase in EBITDA, its key profitability measure.  Improvements in operational efficiency and productivity, together with management‘s continued efforts to contain costs and optimise capital investment, has resulted in Transnet achieving impressive results.  The Company is striving to be a digital organisation with a strong focus on maximising the use of technology to drive efficiency, effectiveness and innovation.  Transnet will continue to create value for customers by strengthening infrastructure reliability in existing markets.  Transnet is also seeking new growth paths to compensate for lower growth expectations in its traditional markets.

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