By Sfundo Parakozov
JOHANNESBURG (Reuters) -South African freight rail and ports company Transnet made a smaller loss in the last financial year and said on Friday its turnaround programme was starting to deliver results, although its auditor repeated concerns about its viability.
Transnet, one of a handful of South African state companies that have held back Africa’s biggest economy for years, reported a loss of 1.9 billion rand ($108.18 million) in the 12 months to the end of March, down from 7.3 billion rand the year before.
The group’s chronic underperformance has stifled exports of commodities such as coal and iron ore, costing mineral exporters billions of rand in lost revenue.
Kumba Iron Ore and thermal coal exporter Thungela Resources are among the companies that have been forced to curtail production.
Transnet said its revenue rose 7.8% to 82.7 billion rand, while net operating expenses decreased 4.9% to 52.1 billion rand.
Freight rail, Transnet’s largest operating division, recorded an improvement in volumes hauled to about 160 million metric tons, up from 152 million tons in the previous year but lower than a target of 170 million tons.
“The tide is beginning to turn.
Revenue is rising, losses are narrowing, and volumes are stabilising. The foundations of recovery are taking hold,” Chief Executive Michelle Phillips told a news conference.
South Africa’s auditor-general said in a report on Transnet’s financial statements that there was “material uncertainty … on the entity’s ability to continue as a going concern,” the second year running it has made that observation.
It cited the latest financial loss, covenant breaches and credit rating downgrades.
Ratings agency S&P Global downgraded Transnet’s rating in July, saying its capital structure was unsustainable without “extraordinary government support”.
This year the government has promised billions of dollars in guarantees to support Transnet.
Without the guarantees, CEO Phillips said Transnet might have defaulted on its debt.
Transnet said increasing private-sector involvement in the country’s ports and rail network would remain a cornerstone of its strategy.
It targets rail volumes of 180 million tons in the financial year that started in April.
($1 = 17.5632 rand)
(Additional reporting by Nelson Banya; Editing by Alexander Winning and Barbara Lewis)
