Transnet South Africa Posts Wider Loss Citing Hampered Recovery

(Bloomberg) — South Africa’s state-owned rail and ports operator reported a wider first-half loss as failing infrastructure and security issues continue to hamper progress in turning the business around 

Transnet SOC Ltd.’s loss was 2.2 billion rand ($118 million) in the six months through September, compared with 1.6 billion rand a year earlier, it said in an emailed statement on Tuesday. The company once more secured waivers — as it did last year — from banks to avoid triggering a debt default, after it breached loan covenants during the period.

The rising cost of servicing Transnet’s debt eroded its measure of cash interest cover — the amount of interest expenses a company can pay from earnings — to 1.9 times, while a number of loans require as much 2.5 times, it said. Net finance costs increased 7.9% to 7.1 billion rand during the period. 

The company that’s essential to South African import and export flows has had an abysmal performance in recent years. Rail inefficiencies cost the economy more than 400 billion rand in 2022, according to the National Treasury, while the nation’s minerals council estimates mining exports fell 50 billion rand short of target. The ports it runs have been ranked among the worst in the world. 

“Transnet has made progress, with early successes in stabilizing operations, improving financial performance, and addressing infrastructure challenges,” it said. The company will prioritize projects that improving the availability of rolling stock and the condition of rail infrastructure. Ports have focused on fixing key equipment and securing critical spare parts. 

Transnet launched a turnaround strategy more than a year ago to overhaul its rail and port services and tackle the fallout from years of mismanagement, theft and vandalism.

“Significant work remains, particularly in areas including debt management and security,” it said. “Transnet’s progress in line with its recovery plan continues to be hampered by operational challenges that are impeding the clear progress made in revenue and cash generation from operations after working-capital changes.”

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