Transnet says outlook remains positive

However‚ the state-owned rail‚ ports and pipelines group concedes that the marked decline in economic activity both domestically and internationally had hampered its ability to meet its volume targets.

"These conditions seem likely to continue in the next financial year‚" Transnet said in its integrated report‚ tabled in Parliament together with its annual financial statements for 2012/13 and its sustainability report.

"While there is no doubt that conditions will be difficult over the short-term‚ Transnet is in a strong position to weather the storms and is poised to harness the benefit from the potential upswing in the economy.

"The gains realised in the past few years have transformed the company into a more agile and resilient business," it said.

The Transnet board said it had decided to continue with its market demand strategy and would continue with its "counter-cyclical" investment strategy to invest R307.5bn over the next seven years.

Rail‚ port and pipeline capacity would increase ahead of market demand.

Funds coming or in place

The group plans to raise R19.3bn over the 15 months with R7.5bn coming from domestic bonds‚ R2bn from bank loans and other sources‚ and R9.75bn from developmental finance and export credit institutions along with its global medium-term note programme.

In addition Transnet has about R5bn in an on-demand facility and a further R1.7bn facility with the African Development Bank.

The board said it had concluded that Transnet's market demand strategy goals remained achievable‚ although at higher risk levels due to volatility and medium-term uncertainty in both the domestic and international markets.

Risk appetite

"Based on the strength of its current financial position and its role as a catalyst to enable economic growth‚ Transnet has a higher risk appetite than many corporations‚ which are curtailing spending or deferring spending on major capital projects to shield their financial position in the face of economic uncertainty," the parastatal said.

In the year to March‚ Transnet grew revenue by 9.4% to R50bn from R46bn in 2011/12 and its gearing rose to 44.6% from 41.9% - still well below its 50% target range. Cash:interest cover remained strong at 3.7 times‚ from 4.2 previously.

"The gearing ratio is not expected to exceed the target ratio over the medium term‚" the report said.

At the end of March Transnet had total borrowings of R73bn‚ down from R58bn a year earlier.

While the report showed strong improvement in internal controls‚ it noted that 340 criminal cases had been lodged with the South African Police Service for losses of R37.5m suffered by the group‚ mainly as a result of cable and equipment theft.

Uncondoned irregular expenditure for the year amounted to R229m‚ of which R122m stemmed from failure to adhere to procurement procedures‚ R58.6m from contraventions of delegated authority and R50.3m from exceeding contract costs.

Source: Business Day via I-Net Bridge