INTERIM RESULTS FOR THE PERIOD ENDED 30 SEPTEMBER 2015 29 October - - PowerPoint PPT Presentation

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

• n rail growth of 4,2%.

B-BBEE spend of R26,97 billion or 96,5%

• f 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

2

TRANSNET 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

3

TRANSNET 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 statement

ABRIDGED 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)

32 228 30 282

2015

+6,4%

2014

Revenue contribution by Operating Division** (%)

TFR

50 15

TE

16

TPL TNPA

5

TPT

14 * Variance % to prior period. ** Excludes specialist units and intercompany eliminations.

34,8 32,9 10,5 10,3 7,5 4,6

110,5

9,8 5,5 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)

2 342 2 290

2015

+2,3%

2014

Revenue and volumes

REVENUE AND VOLUMES

FOR THE PERIOD ENDED 30 SEPTEMBER 2015

5

TRANSNET 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

18 325 17 522

2015 2014

+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

TPT

11 10

TPL TFR

2 50

EBITDA

EBITDA

FOR THE PERIOD ENDED 30 SEPTEMBER 2015

7

13 903 12 760

2014

+9,0%

2015

+1,0%

2015

43,1 42,1

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

6 889 5 757

+19,7%

2015 2014

744 653

+13,9%

2015 2014

3 584 3 331

+7,6%

2015 2014

1 778 2 144

• 17,1%

2015 2014

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

9

TRANSNET 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

Other Borrowing costs

+4,8%

Sept 2015 Depreciation & derecognition

(6 774)

Revaluation Additions March 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 borrowings

TOTAL BORROWINGS

FOR THE PERIOD ENDED 30 SEPTEMBER 2015

11

+1,4%

41,4

September 2015 March 2015

40,0 125 023 110 377

+13,3%

September 2015 March 2015

TRANSNET REVIEWED INTERIM RESULTS

* Absolute variance.

*

Cash interest cover (times)

3,6

March 2015

3,0

September 2015

3,0

Sources of funding Sept 2015 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 funding

ABRIDGED CASH FLOW STATEMENT AND FUNDING

FOR THE PERIOD ENDED 30 SEPTEMBER 2015

12

TRANSNET 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 containers

4%

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
• perational efficiency

improvements, on-time departures reflect well. On-time departure (minutes)

Rail – export coal

VOLUMES AND OPERATIONS

FOR THE PERIOD ENDED 30 SEPTEMBER 2015

15

TRANSNET 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

43 206 209

2012 Sept 2015 2015 2013 2014 2,978%

263 170 134 332 375

55% Sept 2015 2015 2014 2013 2012 Sept 2015 40,7 37,4

• 1%

2015 41,1 2014

Rail – export iron ore 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

16

TRANSNET 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 73 67

Sept 2015 2012 2013 401% 2015 2014

273 57 129 140 133

379% 2015 Sept 2015 2013 2014 2012

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

• bjective 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) Rail – general freight business (GFB)

17

VOLUMES AND OPERATIONS

FOR THE PERIOD ENDED 30 SEPTEMBER 2015

TRANSNET REVIEWED INTERIM RESULTS

Sept 2014 +9% Sept 2015 2015 46,1 2014 43,1 99,0 2016 Latest Estimate 88,0 90,5 2013 2012 81,0 82,6

• 7%
• 8

79 213 280 284

2014 2013 2012 110% Sept 2015 2015

86 201 340 356 357

2012 2014 Sept 2015 2015

57%

2013

Ports – containers 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

2 342 2 290 4 646 4 571 4 503 4 237 4 305 +2% Sept 2015 Sept 2014 2016 Latest Estimate 2015 2014 2013 2012 +2%

70 46 43 34 78 50 26 27 51 84 46 42 26 62 65 21 24 48 Cape Town Durban Manganese (Port Elizabeth) Iron ore (Saldanha) Coal (RBCT) Ngqura Richards Bay East London Port Elizabeth Sept 2015 March 2015 8,9 Port Elizabeth 9,4 Richards Bay 8,6 8,5 Saldanha 1,8 1,9 CTCT 1,1 1,0 DCT - Pier 2 2,9 3,3 DCT - Pier 1 2,6 3,3

Pipelines 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%

• ver 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 58,8 106 120 99 89

• 12%

Sept 2015 2015 2014 2013 +1% Sept 2015 85,0 2015 84,0 2014 81,0 99 99 100 2015 Sept 2014

• 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

0,65 0,65

2015

0,69

2012

0,74

2013

0,69

Sept 2015

3 4 7 9 7

2013 2014 Sept 2015 2012 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.

20

TRANSNET REVIEWED INTERIM RESULTS

96 106 125 100 88

2015 2013 2012 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 resources

HUMAN 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

85 85 97 106

2015

• 8%

2014 Actual Target

5 8 8 26 22 19 10 7

+3% +3%

2014 2015

• 3%
• 18%

Black woman-owned Black-owned Exempted micro-enterprises Qualifying small enterprises

* Various QSE & EME reclassified to large entities. ** Includes locomotive build programme.

+207%

Total contract value

99,282 32,319

2015 2014 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.

23

TRANSNET REVIEWED INTERIM RESULTS

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