Sustainability Report 2012 - Transnet

A financially stable businessSince 2005, Transnet has been gearing up for growth initially through the Four-point Turnaround strategy toachieve financial stability (reigniting investment, strengthening governance and disposing of non-core assets) andthereafter the Quantum Leap strategy to achieve operational stability (establishing a sound funding strategy,eliminating backlog and consistently achieving strong financial results). Transnet is now ready to embark on anaggressive investment drive to ensure growth through the MDS. A financially stable business is critical to achievethis. Financial performance over the past year indicates that the Company is able to maintain a strong financialposition: evidence of the Company’s ability to generate sustainable cash flows. target of 3,0 times despite an increase in net finance costs resulting from increased borrowings to fund thecapital investment programme. It is expected that the cash interest cover ratio will not fall below the target overgoing forward. economic growth outlook both locally and internationally. The gearing ratio deteriorated marginally to 42,1% asat 31 March 2012 despite the capital expenditure of R22,3 billion. This level is still well below the target rangeof 50,0% reflecting the significant capacity available to fund future capital expenditure. to access the capital markets to raise the required funding for the year ahead.Sustainability performance: Economic dividendsDecrease in insurance premiumsThe unprecedented severity andcost to insurers of global naturaldisasters in 2011 have adverselyinfluenced insurance pricing and theavailability of insurance capacity.This posed a challenge for the2012/13 insurance renewal.Insurers however, expressedconfidence in Transnet’s EnterpriseRisk Management process andmaturity and the progress made overthe last year on various safetyinitiatives to reduce our incidentsand claims. Despite the hardening ofthe insurance market, Transnet wasable to achieve a 13,5% reduction inthe premiums for 2012/13 as wellas a reduction in the rolling stockstop loss deductible fromR75 million to R50 million, whilestill placing cover only with A-ratedinsurers.LOOKING AHEADTransnet’s economic dividends focus for 2012/13:Capital investment of R31,2 billion to address demand.Grow rail volumes to 225mt; containers through ports to4,8 million TEUs; automotives through ports to 610 000units; and petroleum through pipelines to 18 021 million kl.Scheduled railway operations with high efficiency targets.Container terminal moves per gross crane hour between28 and 32.Accelerated skills development.Extend local supplier development, with 70% of spend onB-BBEE suppliers.Grow cross-border rail volumes and exports oflocomotives and wagons.Grow agriculture and timber rail volumes to 5,6mt.Increase direct jobs to 63 725 and indirect jobs to172 934.Maintain gearing below 50,0% and cash interest coverabove 3 times.Attract private sector investment of R1,5 billion.Sustainability Report 201245