South African state-owned logistics firm Transnet reported a slight rise in full-year revenue on Monday, due to a jump in railed cargo, offsetting a slump in commodity prices.
Transnet, which operates nearly three quarters of all Africa’s rail network, is embarking on a major expansion drive in the rest of the continent after struggling with declining commodity exports due to a slump in minerals prices.
Revenue increased by 1.7% to R62.2 billion in the year to the end of March, while earnings before interest, taxation, depreciation and amortization (EBITDA), or core profit, rose by 2.6% to R26.3 billion.
Iron ore and coal have been major cash cows for Transnet for the past decade, but lower prices and weak global demand have hit revenues for one of the best-run state-owned firms in Africa’s most industrialised country.
Coal export volumes fell by 5.5% to 72.1 million tonnes while iron ore export volumes were down 3% to 58 million tonnes, the company said.
Lower commodity prices are forcing Transnet’s key customers such as Kumba Iron Ore and Glencore to defer their expansion programmes.
Transnet said it was on track with a 10-year R380 billion ($25 billion) plan to expand railways, ports and pipelines, and was almost fully financed from existing credit lines with no plans to issue any bonds.
Transnet has spent 124 billion rand on new infrastructure in four years and the company is looking at a mix of funding options to continue the firm’s 10-year investment plan.
“We will continue to tap into the domestic bond market, especially over the coming years. There is still quite a bit of appetite for Transnet. Globally I don’t think that we would be looking at the global issuance… anytime soon,” Chief Financial Officer Garry Pita said.
The company’s performance has improved thanks to a turnaround, compared with many of South Africa’s 300-odd state entities are a drain on the government’s purse.
The firm is also building three freight rail terminals in Gauteng province, the country’s commercial hub, handling cargo for import and export ranging from cars to grain and commodities such as iron ore.