1
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2014 29 October 2014
Presented by Mr Brian Molefe, Group Chief Executive
Investor and Media
Agenda
Macro economic context
Executive summary
Actual performance to date in perspective
Financial results
Capital investment
Volumes and operations
Socio-economic and sustainability
Conclusion
2 TRANSNET INTERIM RESULTS 2014
3
Macro-economic context is significantly worse than 12
months ago
12 months ago Today
▪ Global GDP growth 3,6 3,8
▪ BRICs GDP growth
– China 7,3 7,1
– Brazil 2,5 1,4
– India 5,1 6,4
– Russia 3,0 0,5
▪ Iron ore 132,67 82,38 $/ton
▪ Thermal coal price 80,65 67,86 $/ton1
1. Richards Bay 6 000kcal
▪ Crude oil (Brent) 107,66 85,83 $/bbl
▪ GDP growth 2,9
1,4 %
%
%
%
%
%
▪ Rand/$ 9,90 10,95
▪ Inflation (CPI) 5,5 5,9 %
▪ Current account deficit 5,9 6,2 % of GDP
South African indicators
Global indicators
TRANSNET INTERIM RESULTS 2014
4 TRANSNET INTERIM RESULTS 2014
Executive summary 30 September 2014
Cash generated from operations after
working capital changes increased by
57,4% to R17,7 billion.
Strong volume growth in automotive
and containers on rail of 14,3%.
B-BBEE spend of R24,9 billion or
105,6% of total measured procurement
spend for the period per DTI codes.
Revenue increased by 6,4% to
R30,3 billion. Capital investment increased by
66,8% to R18,7 billion.
EBITDA increased by 6,0% to
R12,8 billion.
Gearing at 46,8% and cash interest
cover at 4,4 times.
DIFR at 0,68 reflects a 4 year stable
safety record.
5
Performance to date in perspective
Year-on-year
Volume growth (weighted) +2,8% (2,4%)
Revenue +6,4% (7,1%)
EBITDA* +6,0% (7,4%)
Depreciation +19,0% (7,9%)
Finance cost +15,9% (8,2%)
Net profit after tax (24,9%) (15,5%)
Capital investments +66,8% +59,5%
Cash interest cover +29% (9,4%)
Gearing +2,1% +1,0%
(Budget comparison excludes R6,1bn loco accruals).
TRANSNET INTERIM RESULTS 2014
Financial highlights
2014
R billion
2013
R billion
%
variance
Revenue 30,3 28,5 6,4
EBITDA 12,8 12,0 6,0
Cash generated from operations after working capital
changes 17,7 11,3 57,4
Capital investment* 18,7 11,2 66,8
Key ratios 2014 2013
EBITDA margin (%) 42,1 42,3
Gearing (%) 46,8 45,9
Cash interest cover (times) 4,4 3,4
Return on average total assets (excluding CWIP) (%) 6,5 6,5
* Excludes capitalised borrowing costs and intangible assets, including capitalised finance leases and decommissioning restoration liabilities. # Excludes Regulator claw backs.
#
TRANSNET INTERIM RESULTS 2014 6
7
2014 2013 %
R million R million variance
Revenue 30 282 28 461 6,4
Net operating expenses excluding depreciation, derecognition and amortisation (17 522) (16 426) 6,7
EBITDA 12 760 12 035 6,0
Depreciation, derecognition and amortisation (5 757) (4 838) 19,0
Profit from operations before items listed below 7 003 7 197 (2,7)
Impairment of assets, fair value adjustments and other items (719) (288) 149,7
Net finance costs (3 227) (2 748) 17,4
Profit before taxation 3 057 4 161 (26,5)
Taxation (913) (1 308) (30,2)
Profit for the period 2 144 2 853 (24,9)
TRANSNET INTERIM RESULTS 2014
Abridged income statement
Revenue (R million) Rail volumes (mt)
30 28228 461
+6,4%
2014 2013
Revenue contribution by Operating Division* (%)
TPL
5 TPT
13
TNPA 15
TE
15
TFR 52
* Excludes specialist units and intercompany eliminations.
2013
105,8
5,8 11,3
9,1 6,3
31,4
41,9
+4,4%
2014
110,5
5,5 10,9
10,3 7,2
32,9
43,7
Agriculture and bulk (-5%)
Steel and cement (-4%)
Mineral mining and chrome (+13%)
Containers and automotive (+14%)
Iron ore and manganese (+5%)
Coal (+4%)
Port containers (‘000 TEUs)
TRANSNET INTERIM RESULTS 2014 8
Revenue and volumes
2 2902 379
2014
-3,8%
2013
9
The operating cost increase was managed closely by the implementation of numerous cost-reduction and containment initiatives
implemented throughout the Company, which resulted in a R1,3 billion saving in planned costs. Expenses increased by 6,7% to
R17,5 billion mainly due to:
• Increase in energy costs due to the higher electricity tariffs as well as fuel price increases impacted by foreign exchange
volatility.
• Marginal increase in personnel costs to R9,0 billion (2013: R8,9 billion).
21
10
Operating expenses (R million) Operating expenses contribution by
cost element (%)
21
5
20
54
Other operating expenses
Material and maintenance costs
Energy costs
Personnel costs
TRANSNET INTERIM RESULTS 2014
Operating expenses
17 52216 426
+6,7%
2014 2013
10
* Excludes specialist units and intercompany adjustments.
EBITDA (R million)
EBITDA margin (%)
EBITDA contribution by Operating Division* (%)
TPL
9
TPT
10
TNPA 26
TFR 55
TRANSNET INTERIM RESULTS 2014
EBITDA
12 76012 035
+6,0%
2014 2013
-0,2%
2014
42,1
2013
42,3
11 TRANSNET INTERIM RESULTS 2014
Depreciation, derecognition and amortisation of assets for the period
increased by 19,0%, mainly as a result of capital investments as well as
the depreciation of revalued port facilities and pipelines. This trend is
expected to continue in line with the execution of the capital investment
programme.
Impairment of assets, amounting to R653 million relates primarily to the
impairment of trade and other receivables, as well as an impairment of
property, plant and equipment.
.
Net finance costs increased by 17,4%, 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 finance costs (R million)
Profit for the period (R million)
5 7574 838
+19,0%
2014 2013
653
196
+233,2%
2014 2013
2 1442 853
-24,9%
2014 2013
The decrease in profit for the period was 24,9% as a result of higher
depreciation, impairment charges and finance costs for the period.
Depreciation, derecognition and amortisation, impairment, net
finance costs and profit for the period
3 2272 748
+17,4%
2014 2013
September 2014 March 2014
R million R million
ASSETS
Property, plant and equipment 222 382 207 322
Investment properties 8 721 8 572
Other non-current assets 10 858 9 168
Non-current assets 241 961 225 062
Current assets 17 760 15 011
Total assets 259 721 240 073
EQUITY AND LIABILITIES
Capital and reserves 100 207 97 113
Non-current liabilities 129 239 117 723
Current liabilities 30 275 25 237
Total equity and liabilities 259 721 240 073
TRANSNET INTERIM RESULTS 2014 12
Abridged statement of financial position
PPE increased by 7,3% to R222,4 billion.
Capital investment for the period increased by
R18,7 billion, with R9,0 billion being invested in the
expansion of infrastructure and equipment, while
R9,7 billion was invested in maintaining existing capacity.
Return on average total assets at 6,5% as at
30 September 2014 due to the significant increase in the
asset base.
Property, plant and equipment (R million)
Return on average total assets (excluding CWIP) (%)*
Sept 2014
6,5
March 2014
6,5
* Excludes Regulator claw backs.
TRANSNET INTERIM RESULTS 2014 13
Property, plant and equipment (PPE)
880
1 49418 671
+7,3%
Sept 2014
222 382
Other
(322)
Borrowing
costs
Depreciation
(5 663)
Revaluation Additions March 2014
207 322
Transnet raised R16,6 billion for the period and repaid
borrowings amounting to R9,6 billion. The 10,1%
increase is in line with the funding plan.
The gearing ratio increased to 46,8%. The ratio remains
below the Group’s target range of 50,0%, reflecting
significant capacity available to pursue the counter cyclical
investment strategy.
Total borrowings (R million)
Gearing (%)
TRANSNET INTERIM RESULTS 2014 14
Total borrowings
99 59590 444
10,1%
Sept 2014 March 2014
+0,9%
Sept 2014
46,8
March 2014
45,9
Cash interest cover (times)
3,4
2013
4,4
2014
3,0
Sources of funding
2014 2013
R billion R billion
DFI’s/BTMU/Bilateral loans 9,0 1,7
Domestic bonds and Commercial
paper
3,7
6,7
Call loans 3,9 1,0
Total 16,6 9,4
Credit rating: Long-term foreign currency
A3
Negative outlook
BBB-
Stable outlook
2014
2013
%
R million R million change
Cash and cash equivalents at the beginning
of the period 3 633 2 598 39,8
Cash flows from operating activities 14 111 7 769 81,6
• Cash generated from operations 13 613 12 530 8,6
• Changes in working capital 4 099
(1 277) (421,0)
• Other operating activities (3 601) (3 484) 3,4
Cash flows utilised in investing activities (19 734) (10 778) 83,1
Cash flows from financing activities
(including repayments) 7 014 6 029 16,3
Net increase in cash and cash equivalents 1 391 3 020 (53,9)
Total cash and cash equivalents at the end
of the period 5 024 5 618 (10,6)
TRANSNET INTERIM RESULTS 2014 15
Abridged cash flow statement and funding
Capital investment spend
Capital investment by commodity
12,8
2012
9,5 10,2
2010 2011
+16,2%
2013
11,2
+66,8%
2014
18,7
Capital investment by operating segment
Transnet achieved 88,5% of the R31,2 billion budget for 2013
Replacement: R9,7 billion
Expansion: R9,0 billion
Expansion vs replacement
Other
Piped products
10% Port
containers 4%
Export
iron ore 6%
Bulk 2%
Export coal
6%
GFB 65%
16
6%
8%
10%
76% Engineering and other
Pipelines
Ports
Rail
52% 48%
TRANSNET INTERIM RESULTS 2014
7%
R billion
Major capital deliveries during the period
Quantity
Asset type September
2014
Cumulative
Locomotives
60 class 43 diesel locomotives 8 8
95 20E locomotives 16 25
Wagons
GFB 1 282 4 563
Export coal – -
Asset type Quantity
Rail refurbishment: Infrastructure
Turnouts 67
Universals 256
Screening 247,3 km
Sleepers 185 710
Asset type Stage of completion
Pipeline infrastructure
Coastal terminal 75%
Inland terminal 89%
NMPP Trunkline is 100% complete and fully operational with
product.
17
Asset type September
2014
Quantity
Port infrastructure
RTG’s NCT 4
Straddle carriers 5
Ship-to-shore cranes for NCT 2
Trailers 25
TRANSNET INTERIM RESULTS 2014
Locomotive acquisition programme – estimated delivery schedule
18
General freight business Export coal
Year 95 electric locomotives
1 064
locomotives 60 diesel locomotives Wagons for MDS
100 electric
locomotives
2015 86 – 19 2 704 17
2016 _ 148 41 3 803 83
2017 – 492 – 3 203 –
2018 – 424 – 4 065 –
2019 – – – 5 575 –
2020 – – – 2 314 –
2021 1 294
TRANSNET INTERIM RESULTS 2014
Volumes (mt)
Productivity and efficiency
Route density (Richards Bay corridor)
Tonkm/Routekm
On-time arrivals (minutes)
• Export coal volumes
increased by 5% due to:
improved wagon cycle
times; and
overall improved
operational efficiencies.
• This was achieved despite
1mt lost due to cable theft.
• The latest estimate
suggests that at year end
export coal volumes will
exceed prior year by 9%.
• On-time departures are
performing exceptionally
well when compared to the
prior year, due mainly to
improvement initiatives
focusing on the countdown
and re-planning processes.
• However, en-route
disruptions due to power
outages, cable-theft and
equipment failures
continue to affect on-time
arrivals.
On-time departure (minutes)
74,2
+9%
2015 LE 2014
68,2
2013
69,2
2012
67,7
2011
62,2
943
206209234
-79%
Sept
2014
2014 2013 2012 2011
186134
332375
468
2014 2013 2012 2011
+39%
Sept
2014
Volumes and operations
19
Ra
il –
exp
ort
co
al
36,5
+5%
Sept 2014 Sept 2013
34,6
38,0
+2%
Sept 2014 Sept 2013
37,4
TRANSNET INTERIM RESULTS 2014
Ra
il –
exp
ort
iro
n o
re
Productivity and efficiency
On-time arrivals (minutes)
• Export iron ore volumes
increased by 3% despite:
tippler failures; and
the derailment affecting
the Khumani mine.
• The latest estimate
suggests that at year end,
iron ore volumes will
exceed the prior year by
5%.
• On-time departures
deteriorated compared to
the prior year, but reflects
continued improvement
since 2011, due to process
adherence improvements.
• On-time arrivals are
performing exceptionally
well versus the prior year,
due to a focus to minimise
en-route delays.
On-time departure (minutes)
57,1
+5%
2015 LE 2014
54,3
2013
55,9
2012
52,3
2011
46,2
38
9
7367
161
+322%
Sept
2014
2014 2013 2012 2011
109129140133
285
-16%
Sept
2014
2014 2013 2012 2011
20
Volumes (mt)
Sept 2013
27,0 27,9
+3%
Sept 2014
TRANSNET INTERIM RESULTS 2014
Volumes and operations
21
Productivity and efficiency
On-time arrivals (minutes)
• General freight volumes
increased by 4% compared to
the prior period, mainly due to:
improved operational
efficiencies;
the optimisation of the value
chain with port terminals
and customers; and
growth of market share
arising from the road-to-rail
modal shift.
• Mineral, mining and chrome
volumes were hampered by an
extended period of strike.
• The latest estimate suggests
that at year end, GFB volumes
will exceed prior year by 5%.
• On-time departures and
arrivals are performing well
due mainly to process
adherence improvements,
including a focus on the
countdown and re-planning
processes.
On-time departure (minutes)
92,5
+5%
2015 LE 2014
87,9
2013
82,6
2012
81,0
2011
73,7
Volumes (mt)
Ra
il –
Ge
ne
ral fr
eig
ht
bu
sin
es
s (
GF
B)
46,1
+4%
Sept 2014 Sept 2013
44,2
TRANSNET INTERIM RESULTS 2014
Volumes and operations
93
213
280284
350
-56%
Sept
2014
2014 2013 2012 2011
199
340356357
434
Sept
2014
-41%
2014 2013 2012 2011
22
Po
rts
Container Volumes (‘000 TEUs)
Productivity and efficiency
• Maritime container volumes
decreased by 4% compared
to the prior period, due to a
decline in:
Transshipment
containers;
Vehicle and transport
equipment imports; and
Strong machinery,
electronics, base metal
and chemical product
export volumes.
• The latest estimate suggests
that at year end, maritime
container volumes will be 2%
below the prior year.
• Ship turnaround times are
performing well at most ports,
with the exception of Port
Elizabeth, mainly due to aging
cranes with limited capability,
East London and Richards
Bay.
4 5324 6414 4034 3524 081
-2%
2015 LE 2014 2013 2012 2011
-4%
Sept 2014
2 290
Sept 2013
2 379
Ship turnaround time (hours)
73
474644
71
44
2629
58
77
424445
88
47
2827
51
+5%
-11% -4% +2%
+24%
+7%
+8% -7%
-12%
Iron ore
(Saldanha)
Manganese
(Port
Elizabeth)
Coal
(RBCT)
Ngqura Richards
Bay
East
London
Port
Elizabeth
Cape Town Durban
Sept 2014
March 2014
Volumes and operations
TRANSNET INTERIM RESULTS 2014
23
Pip
eli
nes
Volumes (bℓ)
Productivity and efficiency
Operating cost per Mℓ.km (Nominal R/Mℓ.km)
• Petroleum product
volumes increased by 2%
compared to the prior
period, mainly due to:
Increased avtur
volumes transported
from the coast; and
Improved crude
volumes.
• The latest estimate
suggests that at year end,
petroleum volumes will
exceed the prior year by
1%.
• The NMPP capacity
utilisation averaging 112
mega litres per week
reflects favourably.
• DJP and NMPP capacity
utilisation, Ordered vs
Delivered volumes, and
Planned vs Actual delivery
times reflect favourably.
DJP + NMPP Capacity utilisation (Mℓ/Week)
16,7 +1%
2015 LE 2014
16,6
2013
15,9
2012
16,7
2011
18,0
105998978 +6%
Sept
2014
2014 2013 2012
8,4
+2%
Sept 2014 Sept 2013
8,3
112
51
152
84
Sept 2014 2014
Capacity
Usage
Ordered vs Delivered volumes
(% of deliverables within 5% of order) Planned vs Actual Delivery time
(% of deliverables within 2 hours of plan)
100,0 +1%
Sept 2014 2014
99,0
2013
100,0 84,0
Sept 2014
+4%
2014
81,0
2013
77,0
Volumes and operations
TRANSNET INTERIM RESULTS 2014
24
Disabling injury
frequency rate
(DIFR)
Employee
fatalities
(Numbers)
Safety, the fourth consecutive year the Company has recorded a
DIFR ratio below 0,75
Sept 2014
0,68
March 2014
0,69
March 2013
0,74
March 2012
0,65
March 2011
0,82
3
6
4
5
8
2014 2013 2012 2011 2010
The Company recorded a reduction in
the disabling injury frequency rate
compared to the 0,75 annual target,
which is exceptional by international
standards. This is the fourth consecutive
year that the Company recorded a DIFR
ratio below 0,75, due to continued focus
and investment in safety.
The organisation remains committed to
zero employee fatalities. Despite
considerable efforts to improve safety, the
Company regrets to report three employee
fatalities in the current period, compared to
six in the prior period.
TRANSNET INTERIM RESULTS 2014
Key performance Indicator
Unit of measure Annual
Target
2014
Sept Actual
Training spend % of personnel costs
Rand value
≥ 4,4
2,4
R274,9 million
Engineering trainees Number of learners ≥ 220 192
Technician trainees Number of learners ≥ 363 358
Artisan trainees Number of learners ≥ 605 107
Sector specific trainees Number of learners ≥ 2 178 2 606
Protection officers Number of learners 968 463
Direct jobs created (Transnet employees) Number of jobs ≥ 4 426 2 525*
A representative workforce.
Skills development, capacity
building and job creation.
Actual % Target %
Designated categories Sept 2014 2014
Black 82,3 80,0
Females at Group Exco 40,0 50,0
Females at extended Exco 41,3 50,0
Females below extended Exco 25,5 35,0
PWD’s 1,9 2,0
• 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 2,4% of the labour cost bill on skills development initiatives to grow and develop capacity
requirements to support MDS (focusing on operational and technical training).
• Transnet achieved its targets for 2014 in all critical skills that were the focus for the period, except for sector specific
trainees with 79% of the target achieved.
• Training of 463 protection officers also took place showing positive progress in the School of Security.
• 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.
TRANSNET INTERIM RESULTS 2014 25
Human resources
* Includes fixed term project and trainee contract employees.
TRANSNET INTERIM RESULTS 2014 26
B-BBEE spend of 105,6% per DTI codes and local supplier industry
supported through Supplier development initiatives
Broad-based black
economic
empowerment and
local supplier
industry
development.
8580
106
88
+20%
2014 2013
Actual Target
85
26
10
1917
73
+3%
+16%
+2%
+4%
2014 2013
Black owned
Black woman owned
Emerging enterprises
Qualifying small enterprises
32,3
+75%
Total contract value
18,5
2014 2013
Committed SD obligation
+53%
12,2
8,0 4,8
Actual SD obligation delivered
+67%
8,0
**TMPS – Total Measurable Procurement Spend.
% B-BBEE spend of TMPS** B-BBEE categories spend % of TMPS**
Supplier development programme (R billion)
Conclusion
TRANSNET INTERIM RESULTS 2014 27
• The economic recovery together with the Company’s plan will ensure continued successful implementation of the MDS.
• Capital investment remains on track to create capacity ahead of demand in line with Transnet’s counter cyclical investment strategy.
• Operational efficiency continues to show improvements.
• The current financial year is a watershed year for MDS implementation and as can be seen from current performance the organisation is well placed to achieve its strategic objectives.
Thank you