TRANSNET SOC LIMITED - Transnet's unreviewed financial results for the six months ended 30 September 2021

Transnet's unreviewed financial results for the six months ended 30 September 2021

Transnet SOC Limited
(Incorporated in the Republic of South Africa)
(Registration Number: 1990/000900/30)
Issuer Bond Code: BITRA
(“Transnet”, “the Company” or the “Issuer”)


TRANSNET’S UNREVIEWED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED
30 SEPTEMBER 2021


Following an announcement published on the Stock Exchange News Service (SENS) of the
JSE Limited on 29 October 2021, Transnet is pleased to inform noteholders that its business
has seen a significant recovery from the March 2021 annual financial results as well as in
comparison to the six months ended 30 September 2020.

The easing of national lock downs in South Africa, management’s continued focus on business
operations and the unwavering commitment of our employees has ensured that Transnet
continued to deliver on its mandate.

This recovery in our financial results has been delivered notwithstanding the headwinds that
have been faced by the Company which include the residual enduring negative impact of
Covid-19 to the domestic and global economy, the civil unrest, the cyber-attack as well as
various disruptions to our operations that have been reported by the Company and the media.

Salient Features and Performance Highlights of the Unreviewed Financial Results for
the six months ended 30 September 2021 versus 30 September 2020

   •   Revenue increased by 11.3% from R32.0 billion to R35.6 billion;
   •   EBITDA up by 34.5% from R9,8 billion to R13.2 billion;
   •   Net Loss of R104 million narrowing down from a Net Loss of R3.0 billion;
   •   Cash generated from operations after working capital changes of R18.5 billion;
   •   Expected Gearing of 46.9% and Cash Interest Cover of at least 2.5 times;
   •   Capital investment to sustain and expand our operations of R5.7 billion; and
   •   Debt Service of R15.4 billion in capital repayments and interest paid.

As at 30 September 2021, Transnet had raised long term funding of R6.1 billion against its
2022 Corporate Plan funding requirement of R10.8 billion for the 2021/22 financial year.

Transnet is working with the lenders whose loan agreements are impacted by the Audit
Qualification which was as a result of the legacy of non-compliance to the Public Finance
Management Act requirements with regards to irregular expenditure reporting which also
contributed to the Moody’s downgrade of 03 November 2021.

Transnet has issued a Request for Proposal (RFP) for the services of a Mandated Lead
Arranger (MLA) to support the refinancing of its TNUS 22 bond that matures in July 2022
under its Global Medium-Term Note (GMTN) programme.

Update on Strategy Execution

Transnet is progressing with its Growth and Renewal Strategy which is underpinned by its
commodity segment strategies. Partnerships on several key projects will leverage synergies
between the private sector and Transnet capabilities.
To date the following progress has been achieved on the key strategic deliverables:

   •   Accounting separation of Transnet Freight Rail (Freight Rail) operations and rail
       infrastructure units is at an advanced stage. This is key to understand the true cost of
       our rail slots and partnering with the private sector.
   •   Containers: Requests for Information (RFIs) have been issued to market and are
       progressing according to plan:
         i.    An international terminal operator to partner at Transnet’s Durban Container
               Terminal Pier 2, and
         ii.   An international terminal operator to partner at Ngqura container terminal to
               drive the container transhipment strategy.
   •   Market responses have been extremely positive, and the transactions are in the
       process of being packaged for further partner procurement processes.
   •   Further, the partnership transaction for the development of the Durban Point Container
       Terminal project will be issued to market during November 2021.
   •   Automotive: The RFI for concession of the Inland Terminal (Kaalfontein) is expected
       to be issued to market on or about March 2022. In addition, significant progress has
       been made regarding the feasibility study for the proposed high capacity automotive
       corridor between Gauteng and the Port of Port Elizabeth. The study is anticipated to
       be completed in December 2021; engagement with key stakeholders is ongoing and
       they have reiterated their support (including financial support) should the project prove
       to be viable.
   •   Coal: Planning for the consolidation of all export coal through the Port of Richards Bay
       is underway, with all enablers to be agreed by 31 March 2021, and various operational
       improvements underway to facilitate the migration of volumes;
   •   Chrome & Magnetite: Transnet is working on consolidation initiatives in Maputo as
       part of unlocking magnetite opportunities in the Maputo corridor, in addition to various
       operational improvements to boost capacity by an estimated 30% through the Port of
       Richards Bay.
   •   Iron Ore: Solution development work is at an advanced stage regarding terminal
       capacity at the Port of Saldanha, taking into account long term environmental and
       health impact of operations, for both Iron Ore & Manganese.
   •   Manganese: Following a detailed business impact assessment, the strategy to
       decommission the manganese terminal in Port Elizabeth has been revised and thus
       the closure of the terminal has been delayed. In line with the revised strategy, the
       planned interim solution at the Port of Ngqura will not be pursued and the complete
       Ngqura Manganese Export Terminal solution is being fast tracked. The market has
       been approached for the first phase of this partnership process in October 2021.
   •   Transnet continues to have robust and valuable engagements with customers across
       all segments on ongoing immediate operational improvements and for buy in, support
       and partnerships in the medium to long term segment initiatives discussed above.

With the financial performance for the six months to September 2021 as well as expected
continued recovery for the six months thereafter, we expect the business and financial
performance for the twelve months to 31 March 2022 to be better than the twelve months
ended 31 March 2021. However, we draw caution to the sensitivities and the level of
subjectivity inherent to forward looking information and views, given the amount of time
remaining between the date of this SENS and March 2022.
The financial information on which this SENS announcement is based, has not been reviewed
or reported on by the Company´s external auditors.

Transnet expects to release its financial results for the six months ended 30 September 2021
on or about 15 December 2021.

Johannesburg
12 November 2021

JSE Debt Sponsor
Absa Corporate and Investment Bank (a division of Absa Bank Limited)

Date: 12-11-2021 04:35:00
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