| Mon 22 Aug 2011, 15:03 | | BITRA - Transnet SOC Limited - Audited Condensed Consolidated Financial |
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BITRA
BITRA - Transnet SOC Limited - Audited Condensed Consolidated Financial
Results for the year ended 31 March 2011
Audited Condensed Consolidated Financial Results
FOR THE YEAR ENDED 31 MARCH 2011
Group operating performance - continuing operations
Revenue for the year increased by 6,6% to R38,0 billion (2010: R35,6 billion)
despite the negative impact of the industrial strike action in May 2010.
Although volumes for the general freight business and at the ports were
negatively affected by the strike, overall general freight and container
volumes increased by 2,2% to 73,7mt (2010: 72,1mt) and 12,5% to 4,1 million
TEUs (2010: 3,6 million TEUs) respectively.
Iron ore volumes increased by 3,4% to 46,2mt (2010: 44,7mt) in line with
contractual commitments, notwithstanding the severe derailments experienced
during the year. Coal volumes increased marginally by 0,6% to 62,2mt (2010:
61,8mt) and export coal tariffs were increased in line with contractual
customer commitments to achieve a fair return on invested capital.
The Group`s dynamic management reporting approach provided the agility to
respond to the challenging economic environment and the industrial strike
action, as evidenced by the successful execution of the Group`s Quantum Leap
strategy. Numerous cost-reduction initiatives were implemented throughout the
Company during the year. This resulted in cost savings of R2,1 billion,
despite significant increases in input costs, such as electricity costs of
25,4%. Accordingly, net operating expenses increased marginally by 4,7% to
R22,2 billion (2010: R21,2 billion).
Consequently, earnings before interest, taxation, depreciation and
amortisation (EBITDA) increased by 9,4% to R15,8 billion (2010: R14,4
billion) resulting in an EBITDA margin of 41,5% (2010: 40,5%).
Depreciation and amortisation of assets for the year increased by 18,0% to
R7,2 billion (2010: R6,1 billion). This increase is attributable to the
acceleration of the capital investment programme and the depreciation of
revalued port facilities and pipeline networks. This trend is expected to
continue in line with the execution of the capital investment programme over
the next five years. R86,8 billion has been spent on the capital investment
programme and the port facilities and pipeline networks have been revalued by
R31,9 billion over the past five years.
Accordingly, profit from operations after depreciation and amortisation
increased by 3,1% to R8,6 billion (2010: R8,3 billion).
Post-retirement benefit obligations are actuarially assessed in accordance
with IAS 19: Employee Benefits, and adjusted accordingly. Consequently an
actuarial charge of R155 million (2010: R180 million) was raised for the
year.
Impairment of assets, amounting to R537 million (2010: R778 million), arose
primarily from significant derailments experienced at Transnet Freight Rail
during the year as well as impairments of trade and other receivables
relating mainly to the Passenger Rail Agency of South Africa (PRASA).
Fair value adjustments of R625 million (2010: R18 million loss) relate
primarily to fair value gains from investment property revaluation
adjustments, and from the `mark to market` of derivative financial
instruments, which the Group holds to hedge financial risks associated with
the capital investment programme. The `mark to market` of derivative
financial instruments resulted in a loss of R12 million for the year (2010:
R294 million loss). More specifically, these losses arose from the `mark to
market` of foreign exchange hedges that Transnet executed to eliminate
foreign currency risk, as well as hedges that have not been `hedge accounted`
in terms of IAS 39: Financial Instruments. Investment property revaluations
of R637 million (2010: R276 million) were recognised for the year in terms of
IAS 40: Investment Property.
Accordingly, net profit from operations before net finance costs of R8,6
billion (2010: R7,3 billion) reflects an increase of 16,6% when compared to
the prior year.
Finance costs increased by 14,1% to R3,4 billion (2010: R3,0 billion) due to
increased borrowings to fund the capital investment programme, and is in line
with expectations. Capitalised borrowing costs amounted to R1,8 billion
(2010: R1,5 billion) and are expected to increase in line with the capital
investment programme over the next five years.
The taxation charge for the year amounted to R1,5 billion (2010: R1,8
billion), comprising a current taxation charge of R905 million (2010: R42
million) and a deferred taxation charge of R603 million (2010: R1,7 billion).
At 26,8% (31 March 2010: 36,8%) the effective taxation rate for the Group is
marginally below the corporate taxation rate of 28%.
Net profit for the year from continuing operations amounted to R4,2 billion
(2010: R3,2 billion), an increase of 32,8% compared to the prior year.
Commentary on Operating division performance
Transnet Freight Rail
Revenue increased by 8,6% to R22,6 billion (2010: R20,8 billion) compared to
the prior year. The increase in revenue is attributable to an increase in
volumes as well as yield management strategies that optimised cargo mix.
General Freight volumes increased by 2,2% to 73,7mt (2010: 72,1mt) during the
year, despite a protracted strike as well as operational issues such as cable
theft and rolling stock related faults.
Export iron ore volumes increased by 3,4% to 46,2mt (2010: 44,7mt), mainly
due to an improvement in efficiencies, despite the impact of three major
derailments during the year, as well as capacity constraints at the mines
which also negatively impacted volume growth.
Export coal volumes increased by 0,6% to 62,2mt (2010: 61,8mt). This marginal
improvement was achieved despite the impact of three major derailments,
tippler constraints at Richards Bay Coal Terminal, adverse weather conditions
during the third quarter of the year as well as a loss of 3,1mt due to the
extended period the line was shut down, due to delayed maintenance, as a
result of the strike. Export coal tariffs were increased in line with
contractual customer commitments to achieve a fair return on invested
capital.
A cost-reduction programme initiated during the year yielded positive
results. Net operating expenses increased by 7,7% to R14,5 billion compared
to the prior year, despite a 16,5% increase in maintenance costs and
electricity tariff increases of 25%. This resulted in an EBITDA of R8,1
billion (2010: R7,4 billion) an increase of 10,1% compared to the prior year.
Whilst progress has been made to identify the root causes of the operational
issues, a key focus area will be to address the operational inefficiencies
that negatively impacted volume growth over the year. Accordingly, Transnet
Freight Rail will focus on priority commodities and safety initiatives in the
year ahead.
Transnet Rail Engineering
Transnet Rail Engineering`s internal revenue increased by 24,9% to R8,7
billion (2010: R6,9 billion) compared to the prior year. The increase is due
to increased maintenance demand from Transnet Freight Rail. Maintenance
programmes for locomotives and wagons are on track to support volume growth.
All availability and reliability targets for rolling stock, apart from the
coal line locomotives, have been met or exceeded, which impacted positively
on service delivery of Transnet Freight Rail.
Transnet Rail Engineering`s external revenue decreased by 48,4% to R661
million (2010: R1,3 billion) mainly due to the lower number of PRASA coach
upgrades performed.
Operating expenses increased by 8,3% to R8,2 billion (2010: R7,6 billion)
against a backdrop of an increase in activity resulting in net operating
expense savings of 5,2%. This saving was achieved through the implementation
of numerous cost-reduction and service-optimisation initiatives, particularly
from procurement savings initiatives and Lean Six Sigma projects.
As a result of the increased internal sales and stringent cost control,
EBITDA increased by 71,8% to R1,2 billion (2010: R670 million) compared to
the prior year.
The Company is pleased to report that it has made significant progress both
operationally and financially in the current year despite a challenging
operating environment, which was negatively impacted by the industrial strike
action, derailments and increasing input costs. The Quantum Leap initiatives
delivered meaningful improvements in the port and pipeline operations. This
included volume growth and productivity improvements that, together with cost-
reduction initiatives, contributed to improved profitability. The roll out of
the capital investment programme continues to create capacity ahead of demand
to enable economic growth. However, rail operations have underperformed on
key elements of the Quantum Leap strategy, particularly volume growth, safety
and operational efficiency.
Income statement
For the year ended 31 March 31 March
(in Rand million) 2011 2010
Restated
Continuing operations
Revenue 37 952 35 610
Net operating expenses (22 189) (21 201)
excluding depreciation and
amortisation
Profit from operations 15 763 14 409
before depreciation,
amortisation and items
listed below (EBITDA)
Depreciation and (7 184) (6 089)
amortisation
Profit from operations 8 579 8 320
before the items listed
below:
Impairment of assets (537) (778)
Post-retirement benefit (155) (180)
obligation costs
Fair value adjustments 625 (18)
Income from associates and 58 5
joint ventures
Profit from operations 8 570 7 349
before net finance costs
Finance costs (3 439) (3 014)
Finance income 561 578
Profit before taxation 5 692 4 913
Taxation (1 508) (1 763)
Profit for the year from 4 184 3 150
continuing operations
Discontinued operations
Loss from discontinued (71) (128)
operations, including loss
on disposal of
discontinued operations
and impairments
Profit for the year 4 113 3 022
Transnet SOC Limited
22 August 2011
Date: 22/08/2011 15:03:01 Produced by the JSE SENS Department.
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