Transnet, the state-owned operator of rail and ports in South Africa, reported a widened loss for the first half of the year due to ongoing infrastructure deterioration and security issues that hamper revitalization efforts.
The operator incurred a loss of R2.2 billion in the six months ending September, a rise from R1.6 billion in the same timeframe last year, according to an announcement sent via email on Tuesday.
The company has once again secured waivers — similar to last year — from lenders to avert a debt default following breaches of loan covenants in recent months.
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Increasing debt servicing expenses have led to a decline in Transnet’s cash interest cover — the ratio of earnings available for interest payments — which now stands at 1.9 times, while several loans stipulate a minimum of 2.5 times. During this period, net finance costs grew by 7.9% to R7.1 billion.
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As a crucial player in South Africa’s import and export framework, Transnet’s performance in recent years has been disappointing. Rail inefficiencies reportedly cost the economy over R400 billion in 2022, as highlighted by the National Treasury, while the minerals council estimated mining exports fell short of their target by R50 billion.
The ports under Transnet’s management have been noted as among the worst in the world.
“Transnet has made progress, achieving initial successes in stabilizing operations, improving financial performance, and addressing infrastructure challenges,” the company remarked.
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The organization will concentrate on initiatives to boost the availability of rolling stock and enhance rail infrastructure. The ports are prioritizing the restoration of essential equipment and sourcing critical spare parts.
Transnet launched a turnaround strategy over a year ago aimed at rejuvenating its rail and port services while addressing the fallout from past mismanagement, theft, and vandalism.
“There remains considerable work to be accomplished, particularly regarding debt management and security challenges,” it admitted.
“Transnet’s progress in line with its recovery plan is still hindered by operational challenges that obstruct the clear advancements made in generating revenue and operational cash flow after accounting for working capital adjustments.”
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