R16,3 billion, significantly higher increased by 17,6% to a 7,9% - - PowerPoint PPT Presentation

 Revenue increased by 13,8% to R37,1 billion, underlined by:

• a 7,9% increase in general freight

volumes;

• a 6,5% increase in export coal

railed volumes; and

• a 11,4% increase in railed

automotive and container volumes.  EBITDA increased by 17,7% to R16,3 billion, significantly higher than SA’s GDP growth of 0,5%*.  Profit for the period increased to R3,4 billion (2016: R1,0 billion), more than 230% higher than the prior period.  Gearing at 44,0% and cash interest cover** (CIC) at 3,0 times, are significantly within loan covenant requirements.  Borrowings of R9,9 billion raised and R9,5 billion repaid during the period, reflecting the strength of Transnet’s financial position.  Cash generated from operations increased by 17,6% to R17,2 billion, reflecting our strong cash generating capability.  Operating expenses increased by 10,9% to R20,8 billion, mainly due to:

• the increase in variable costs in

line with higher volumes, with resultant increases in personnel, fuel and electricity costs.  Savings of R2,2 billion were achieved against planned costs.

* The above GDP is calculated on the latest BER estimates for comparative periods (Apr-Sept 2017 vs Apr-Sep 2016). ** Excluding working capital changes.

 Capital investment of R8,9 billion.

• Brings expenditure during the

MDS period to R153 billion.

• 541 locomotives accepted

into operations since the inception of the locomotive acquisition contracts in 2014.  2,8% of personnel costs invested in

• training. Focus on:
• Artisans.
• Engineers.
• Engineering technicians.

 Disabling Injury Frequency Rate (DIFR): 0,72.

• On track to record the seventh

consecutive year that the Company outperformed the target of 0,75 and the global benchmark of 1.

• We regret to report the passing
• n of Mr Edgar Masilela,

construction manager from Transnet Group Capital during the period.

• The Company continues to

proactively strive ‘towards zero harm’.  R104,3 million committed to sustainable community development programmes across South Africa.

• 132 033 patients treated on board

the Phelophepa trains.

• 334 734 individuals benefitting

from community outreach services.  B-BBEE spend: R15,8 billion (87,8% of total measured procurement spend (TMPS) per the DTI codes).

• Black-owned enterprises spend of

R6,4 billion (40,5% of TMPS).

• Black women-owned enterprises

spend of R2,5 billion (15,8% of TMPS).

• Transnet was rated a Level 2 B-

BBEE contributor in 2016.

VOLUMES General freight (GFB) (mt) 82,6 88,0 90,6 84,0 88,1 43,1 46,5 7,9 Export coal (mt) 69,2 68,1 76,3 72,1 73,8 35,5 37,8 6,5 Export iron ore (mt) 55,9 54,3 59,7 58,1 57,2 28,8 29,3 1,7 Total rail 207,7 210,4 226,6 214,2 219,1 107,4 113,6 5,8 Containers (TPT) ('000 TEUs) 4 237 4 503 4 571 4 366 4 396 2 234 2 370 6,1 Petroleum (Mℓ) 15 882 16 583 17 186 17 426 16 978 8 575 8 324 (2,9) FINANCIALS Revenue (including claw back) 50 194 56 606 61 152 62 167 65 478 32 604 37 096 13,8 EBITDA (including claw back) 21 051 23 639 25 588 26 250 27 557 13 865 16 318 17,7 Capital investment 27 471 31 766 33 565 29 561 21 438 9 422 8 948 (5,0) Total assets 203 896 240 073 328 439 356 393 351 635 351 727 362 363 3,0 Total borrowings 73 088 90 444 110 377 134 517 124 780 127 685 126 229 (1,1) RATIOS/STATISTICS EBITDA margin (%) 41,9 41,8 41,8 42,2 42,1 42,5 44,0 Gearing (%) 44,6 45,9 40,0 43,1 44,4 43,8 44,0 Cash interest cover (times)* 3,7 3,5 3,2 3,0 2,8 2,6 3,0 FFO/Debt (S&P) (%) 21,6 20,7 17,2 13,6 13,0 13,3 16,2 FFO/cash interest coverage (S&P) (times) 3,5 3,4 3,0 2,8 2,1 2,1 2,6 Return on total average assets 7,7 6,6 6,4 3,7 4,6 3,8 5,9 Net debt/EBITDA 3,3 3,5 3,7 4,1 4,2 4,0 3,7 Group operational efficiency (%) 3,3 13,8 16,6 15,9 14,9 13,7 3,6 Real GDP growth (%) 2,2 1,5 1,4 0,6 0,7 0,7 0,5

* Excluding working capital changes.

* Absolute variance. ^ Excluding working capital changes.

Transnet's performance was exceptional in the context of a depleted economy, with EBITDA growth of 17,7%, in spite of GDP growth tracking below expectations: 2012/13 1st year of MDS 2017/18 Budget Sept 2017 latest BER estimate 2,8% 1,0% 0,5% (2,9) 6,1 5,8 Prior period Rail Ports Pipelines

Sept 2017 vs prior period

Weighted group volume performance

+6,3%

Revenue excluding claw back

+12,5% +17,7%

Depreciation

(19,8%)

Capital investment

(5,0%)

Cash interest cover (times)*^

+0,4

Gearing*

+0,2%

Finance cost

+5,7% +13,8%

Revenue including claw back EBITDA excluding claw back

+14,7%

EBITDA including claw back

32 422 36 475 2016 37 096 +13,8% 2017 182 621 32 604 Claw back

* Variance % prior year.

ℓ

2016 107,4 28,8 35,5 43,1 46,5 113,6 +5,8% 2017 29,3 37,8 Export iron ore +1,7%* Export coal +6,5%* General freight +7,9%* 2 370 2 234 +6,1% 2017 2016 8 324 8 575 2016

• 2,9%

2017

59% of Transnet’s revenue is guaranteed as a result of regulated entities and take or pay contracts.

TPT TPL 5 TNPA 16 TE 11 TFR 53 15

Exceptional in the context of a sluggish economy.

14,3 23,7 11,3 14,9 67,6 84,4 17,0 24,7 95,4 73,0 10,5 69,6 21,0 20,8 17,5 9,1 20,7 90,4

Cost-reduction initiatives implemented throughout the Company resulted in a R2,2 billion saving against planned costs. These initiatives included:

• Reduction in professional and consulting fees; and
• Limit on discretionary costs as it relates to travel, accommodation, printing,

stationery and telecommunications.

20 778 18 739 2017 +10,9% 2016 60 19 4 6 11 Other operating expenses Material and maintenance Electricity costs Personnel costs Fuel costs

Net operating expenses increased by 10,9%, mainly due to:

• the increase in variable costs in line with higher volumes, with resultant

increases in personnel, fuel and electricity costs. These three cost categories represent 77% of net operating expenses.

20

• 1

57 13

42,5 44,0 +1,5% 2017 2016

*

* Absolute variance.

13 683 15 697 16 318 +17,7% 2017 182 621 2016 13 865 Claw back TPL** 10 TPT 12 TNPA** 23 TE

• 1

TFR 56

** Regulated entities.

EBITDA at 17,7%, well in excess of SA’s GDP growth of 0,5%. Regulated entities (33%) and take or pay contracts (40%) represent 73% of Group EBITDA.

Depreciation, derecognition and amortisation of assets decreased by 19,8%, mainly due to the annual useful life adjustments to rolling stock and the re-phasing of capital investments to align with lower market demand. Finance costs increased by 5,7%, in line with expectations, due to the increased cost of borrowings. Impairment of assets relates primarily to impairments of trade and other receivables, as well as index valuation impairments on port operating assets.

6 428 8 015

• 19,8%

2017 2016 590 914

• 35,4%

2017 2016 4 707 4 452 +5,7% 2017 2016

1 835 6 337 8 948 +3,5% Sept 2017 322 773 Impairment and other (39) Borrowing costs Deprec. (6 235) Reval. Additions March 2017 311 927 5,9 +2,1% 2017 2016 3,8

*

PPE by 3,5% to R322,8 billion. Due to:

• capital investment of R8,9 billion.

̶ Expansion: R2,1 billion; and ̶ Sustaining: R6,8 billion.

• R153 billion invested in the past five years.
• R229,2 billion (including a R20 billion ‘war chest’ for revenue diversification

planned up to 2023/24). 541 electric and diesel locomotives accepted into operations, in terms of the contracts for 1 319 new locomotives signed in 2014. Return on total average assets of 5,9% represents an absolute increase of 2,1% compared to the prior period, mainly due to a 69,1% increase in operating profits.

* Absolute variance. ** Excluding capital work in progress and Regulator claw backs.

126 229 124 780 Sept 2017 +1,2% March 2017 44,0

• 0,4%

44,4 March 2017 Sept 2017

*

3,0 2017 2,6 2016

The gearing ratio by 0,4%.

• Below the target range of 50,0%; and
• Well below the triggers in loan covenants.

Gearing ratio not expected to exceed the target ratio over the medium-term. Reflects available capacity to continue investment strategy, aligned to validated demand. Transnet’s strong cash-generating capability resulted in CIC of 3,0 times which is significantly higher than the triggers in loan covenants. Raised R9,9 billion without government guarantees and repaid borrowings of R9,5 billion.

* Absolute variance. **Excluding working capital changes.

Transnet borrows on the strength of its financial position and has maintained an investment grade credit rating, confirming its solid stand-alone credit profile (SACP). The SACP of Transnet was affirmed at bbb by Standard & Poor’s (above the sovereign), reflecting the Company’s strong financial position. Development finance institutions 1,5 Commercial paper and call loans 5,8 Domestic bond issue and other 1,2 Export credit agencies 1,4 Total 9,9

Baa3/Negative outlook BB+/Negative outlook Baa3/Negative outlook BBB-/Negative outlook

Cash and cash equivalents at the beginning

• f the period

6 422 13 943 (53,9) Cash flows from operating activities 8 246 11 547 (28,6) Cash generated from operations 17 230 14 650 17,6 Changes in working capital (4 566) 738 <(100,0) Other operating activities (4 418) (3 841) 15,0 Cash flows utilised in investing activities (10 522) (10 498) 0,2 Cash flows from/(utilised in) financing activities 493 (5 356) >100,0 Net decrease in cash and cash equivalents (1 783) (4 307) (58,6) Total cash and cash equivalents at the end

• f the period

4 639 9 636 (51,9)

3% 8% 12% 77% Engineering and other Pipelines Ports Rail 76% 24% Replacement R6,8 billion. Expansion R2,1 billion.

The economic slowdown has resulted in Transnet optimising its expansionary capital investment for the period.

* CAGR to 2017.

*

8% 1% 8% 4% 2% 1% 2% 72% Manganese Break bulk Piped products Maritime containers Iron ore Bulk Coal General freight 2% Other 21,4 2016 2017 29,6

• 6,0%

2015 33,6 2014 31,8 2013 27,5 8,9

• 5,0%

Sept 2017 Sept 2016 9,4

* Cumulative since inception of contracts.

Locomotives 233 class 44 diesel 45 162 359 class 22 electric 44 124 95 class 20E electric 95 60 class 43 diesel 60 100 class 21E electric 100 Total for the 1 319 locomotive contracts 541 232 class 45 diesel - 14 locomotives have been delivered and are undergoing acceptance testing. 240 class 23 electric - 8 locomotives have been delivered and are undergoing acceptance testing. 359 class 22 electric - 6 locomotives have been delivered and are undergoing acceptance testing. 233 class 44 diesel - 9 locomotives have been delivered and are undergoing acceptance testing. Wagons GFB and export coal 126 10 268 Rail refurbishment: infrastructure Turnouts (units) 16 Universals (units) 38 Rails (kilometers) 191 Ballast (kilometers screened) 83 904 (m3) Sleepers (units) 224 618 Pipeline infrastructure Coastal terminal phase 1A 100% Inland terminal phase 1A 96%

• The coastal terminal (excluding tanks), 24” main pipeline and 16” inland pipelines have

been fully commissioned and are operational, having transported more than 18 billion litres of diesel from Durban to the inland region since commissioning.

• Following the coastal terminal commissioning in August 2017, the pipeline is now
• perating as a multi-product pipeline, operating at full phase 1 flow rates. This ensures

security of fuel supply for the South African economy over the medium to long-term

• period. The inland terminal is expected to be operational by end of November 2017.

Port equipment Skid steer loader 2 Haulers 4 Trailers 7 Straddle carriers 6 Tugs 6

Export coal volumes:

• by 6,5% from the prior period.

Notwithstanding this increase, performance was below expectations mainly due to:

• community unrest, adverse weather conditions and

stockpile challenges earlier in the period. The outlook for customer product availability to Transnet is positive and the company is focused on maximising on available volumes in the remaining period. Accordingly, the latest estimates indicate that the annual performance will be better than the prior year. Improvement initiatives include:

• Continued engagement to address community

challenges;

• Focused customer engagement on stockpile levels to
• ptimise wagon allocation and reduce customer

cancellations; and

• Continued improvement of operational efficiencies

through ongoing lean six sigma initiatives.

Cycle time (hours)

68,1 2013 69,2 +3,0% 2018 LE 76,0 2017 73,8 2016 72,1 2015 76,3 2014 +2,2% 64,6 Sept 2017 Sept 2016 63,2 37,8 +6,5% Sept 2017 Sept 2016 35,5

Export iron ore volumes:

• by 1,7% from the prior period.

Marginal increase as a result of decreased volumes mainly due to:

• Business rescue processes in the Mining industry;
• Adverse weather conditions; and
• Product unavailability.

Latest estimates indicate annual performance will be better than the prior year and the product availability outlook is positive. Improvement initiatives include:

• Ramp up to 38 daily trains in response to

increased customer demand;

• Continued improvement of operational

efficiencies through ongoing lean six sigma initiatives;

• Customers being placed under business rescue

and accounts suspended due to economic downturn.

Cycle time (hours)

92,6 Sept 2016

• 9,2%

Sept 2017 84,1 2017 55,9 57,2 60,0 +4,9% 2018 LE 2016 58,1 2015 59,7 2014 54,3 2013 29,3 +1,7% Sept 2017 Sept 2016 28,8

GFB volume performance:

• by 7,9% from the prior period; and

Performance increase was mainly due to:

• Focus on product availability and capacity

allocation;

• The container and automotive business grew by

11,4% evidencing continued market share growth from the road-to-rail modal shift;

• A record quarter 2 performance on export

manganese, mainly Natcor and Phalaborwa channels; and

• Increase in chrome volumes.

Annual performance is estimated at 91mt, below budget, due to major risks of customer cancellations, customer loading/offloading challenges, operational challenges and product unavailability. Improvement initiatives include:

• Continuously engage all relevant stakeholders to

improve order book and optimise product availability;

• Focus to improve efficiency and productivity;
• Explore alternative opportunities to shift more

volumes from road to rail; and

• Deployment of the new 23E locomotives planned

for November 2017.

Wagon turnaround time (days)

91,0 +3,3% 2018 LE 2016 84,0 2015 90,6 2014 82,6 88,0 2013 2017 88,1 10,2 Sept 2017

• 12,1%

11,6 Sept 2016 Sept 2017 Sept 2016 +7,9% 46,5 43,1

The current year’s performance:

• by 6,1% from the prior period; and

Increase was mainly due to:

• improved customer demand.

Latest estimates indicate annual performance will be better than the prior year.

4 424 4 396 4 366 4 571 4 503 4 237 +0,6% 2015 2018 LE 2017 2013 2014 2016

Improvement initiatives include:

• Delivery of 23 replacement straddles by December

2017;

• Optimal utilisation of available straddles through

use of prime route and straddle pooling;

• Engagement with shipping lines to improve vessel

stowage; and

• Maintenance of minimum work operations during

adverse weather conditions, in line with standard

• perating procedures.

Sept 2016 +6,1% Sept 2017 2 370 2 234 24 26 55 51 35 29 68 57 Ngqura +12% +24% +12% Durban Pier 1 Durban Pier 2 Cape Town +46% Sept 2016 Sept 2017

4,2 3,6

• 29%
• 17%

Ngqura +17%

• 7%

Durban Pier 1 3,4 2,4 Cape Town 1,0 2,5 3,0 1,1 Durban Pier 2 Ngqura 52,0

• 15%

Cape Town +3% Durban Pier 1 52,7 Durban Pier 2

• 17%
• 5%

45,0 55,4 56,0 47,4 62,6 46,5 Sept 2016 Sept 2017 Sept 2016 Sept 2017

Train turnaround time performing well at most ports. Container moves per ship working hour (SWH) negatively impacted by:

• A busy reefer season;
• Equipment breakdowns; and
• Poor vessel stows received from certain

shipping lines with a ripple effect on ship turnaround time.

Petroleum volume performance:

• 2,9% below the prior period.

Decreased volumes are mainly due to:

• Reduced demand from customers; and
• Product supply interruptions.

129 123 133 120 99 89 Sept 2017 2017 2016 2015 2014 2013 +5% 0% 2017 85,7 84,0 2014 81,0 Sept 2017 86,0 2016 85,6 2015 92 96 98 100 99 Sept 2017

• 4%

2017 2016 2015 2014 113,0 Sept 2017 2017 116,0 2016 110,0

• 3%

17,2 2016 17,0 2014 17,4 2015 2017 +0,3% 17,0 2018 LE 16,6 2013 15,9

• Lower demand had a marginal negative impact
• n pipeline capacity utilisation compared to the

prior period.

• Delivery times to customers continued to

improve while performance against customer

• rders was marginally below expectations.

Interventions

• NMPP Terminal 1 commissioned in July to

positively impact flow rates;

• Maximise on available coastal volumes; and
• Improve ordered vs delivered volumes.
• 2,9%

Sept 2017 8,32 8,58 Sept 2016

2014 0,69 0,69 0,69 2016 2017 0,72 Sept 2017 2015 0,69 1 15 8 4 7 2014 2015 2016 Sept 2017 2017

The Company regrets to report one employee fatality during the reporting period (compared to nine in the prior period). The employee fatality was as a result of a road vehicle accident. Transnet’s leadership has heightened its oversight role of operational performance - and safety performance in particular – in more visible ways through site-visits, and by instituting an integrated systems management approach to ensure the various levels of safety performance are clearly understood and adhered to within the organisation. The Company continues to analyse and review its current safety approaches and efficiency, while proactively striving ‘towards zero harm’. DIFR performance of 0,72 (target: 0,75)

• On track to record the seventh consecutive year of recording a DIFR

ratio below 0,75 due to continued focus on and investment in safety. The Company continues to monitor and mitigate safety risks, as best as is possible, considering both operational and behavioural risks that are inherent in a Transnet work environment.

*Including contract employees.

Transnet has performed well in relation to its employment equity targets. Female representation is growing steadily despite significant challenges in an operations-heavy environment at semi and unskilled levels. Invested 2,8% of the labour cost bill on skills development initiatives (focusing on operational and technical training). Transnet achieved its targets for 2017 in the most critical skills development areas that were the focus for the period. The Transnet Schools of Excellence continued to be flagships of the Transnet Academy’s delivery. 2017 2017 Black 88,0 85,7 Females at GLT 50,0 42,0 Females at extended GLT 50,0 42,0 Females below extended GLT 29,7 28,1 PWD’s 3,1 2,3 Training spend % of personnel costs Rand million ≥ 3,5 2,8 372 Engineering trainees Number of learners ≥ 100 4 Technician trainees Number of learners ≥ 200 17 Artisan trainees Number of learners ≥ 200 187 Sector specific trainees Number of learners ≥ 955 888

Heritage preservation

Managing Transnet heritage assets for future generations.

• The Heritage Policy and National

Heritage Resources Act 25 of 1999 has been communicated to all Operating divisions in Transnet.

• A list of heritage objects

(locomotives and coaches) is now available on the Transnet Foundation website.

Employee volunteer programme (EVP) and socio-economic infrastructure development (SEID)

• The ‘whole school development’

(WSD) programme is successfully integrated with the education portfolio.

• The four community centres

reached 12 482 clients in the period, resulting in community members saving R366,993 in transportation costs.

• 1 300 motorists and pedestrians

have been reached through rail safety programmes.

• 1 926 learners benefited from

career guidance outreach interventions.

Rural and farm schools sports development

• Two multi-purpose sports

complexes completed in Empangeni.

• Sports apparel and equipment

donated to 100 schools.

• 100 000 learners participated in

sporting talent events.

• The first-term grade 12 pass

percentage was 100%.

Healthcare

Access to primary health care services for rural communities. Transnet-Phelophepa I&II.

• 132 033 patients assisted on-

board.

• 334 734 individuals assisted

through outreach services.

• 1 095 youth participants for the

period.

Education

Looks after orphaned and vulnerable youth in communities where Transnet has large projects

• r operations.
• 39 youth participants benefited

from life-skills camps.

• The education managers

maintain regular contact with students and ICAS is on standby to provide counselling when needed.

* TMPS – Total measurable procurement spend. ** B-BBEE spend down due to certain large suppliers being impacted by the introduction of the new codes.

+8% Total contract value 135,509 125,331 2017 2016 +7% Committed SD obligation 62,776 58,508 +44% Actual SD obligation delivered 39,710 27,551 6 6 9 9 41 28 16 9 +7% +13% 0% 0% 2017 2016 Black woman owned Black owned Qualifying small enterprises Emerging enterprises 88 103 101 105 94 88 80 75 65 59 Sept 2017 2010 2009 2015 2014 2013 2012 2011 2017 2016 +5%

**

Moving Ideas competition

• The first selection out of

48 learners was done at the end of August 2017, where a final selection of 20 was agreed upon between Transnet and SABS.

• On 3 October 2017, the

20 finalists presented their ideas, out of which the final 3 were selected.

• The fund is a collaboration

between Transnet, Anglo American and Small Enterprise Finance Agency to provide financial and non- financial support to Transnet black-owned suppliers.

• R150 million allocated to

financial assistance and R15 million for non-financial assistance.

• R49 million worth of loans

have been approved, out of which R47 million has been disbursed.

• The enterprise

development hub aims to ensure that Transnet creates an enabling environment for SMMEs to access products and services that are offered by both provincial and national economic development institutions.

• There are four ED Hubs

in operation with over 18 million walk-ins.

• Property has been

identified in Limpopo and another ED Hub is planned for 1 December 2017 in Empangeni.

• The programme

provides operational support to qualifying black-owned SMMEs that are Transnet suppliers, with the aim

• f waste reduction,

improving utilisation of resources, efficiency and quality.

• The programme has

benefited 76 companies and has 39 companies going through the

• perational efficiency

support programme.

• A non-financial support

service aimed at incubating 100% black-

• wned SMMEs, which

can meet Transnet’s supply chain needs.

• Two incubation centres

are currently running in Richards Bay, and Port Elizabeth.

• An intensive

mentorship drive was initiated during the period and an improvement in business maturity and literacy rate has been noted.

Transnet Matlafatšo Centre

R19 million spend since inception in 2014 to date.

• Through a partnership

between Transnet, SABS, JASA and Wits Transnet Centre for Systems Engineering the initiative aims to stimulate entry by black entrepreneurs, particularly black youth, into the high tech sectors by providing innovation and R&D facilities.

• 110 EMEs and start ups

assisted, 9 individuals assisted and 83 beneficiaries in ideation.

Black Umbrella’s

R31 million spend since inception in 2013 to date. The project has been completed in the current year.

Productivity SA

R18 million spend since inception in 2014 to date. To be completed in 2019.

Enterprise development hubs

R27 million spend since inception in 2014 to date. R12 million expected spend until 2019.

Godisa fund

The fund was capitalised at R165 million for 10 years with an equal contribution of R55 million from each partner.

• A partnership with Seed

Academy for an ICT incubation programme for black owned SMMEs in the ICT sector.

• 10 SMMEs have been

recruited into the programme.

• The recruitment process

is set to continue for 15 additional SMMEs.

• Provides funding for BO,

BWO, BYO, BDO SMMEs in the Cape Region.

• Also provides guarantees

for large contracts and provide accessible funding to SMMEs.

• The agreement has been

approved by Transnet Legal.

• Innovation and

Entrepreneurship Programme for University Students providing mentorship and training in the development of innovative products and services which can translate to operational businesses.

• The 17 rural universities

have been identified and associations have been set up.

• Application for

communication with societies is running.

• Through a partnership

between Transnet and Furntech, this is a Centre

• f Excellence for the

furniture industry,

• ffering business

incubation and/or skills development.

• This initiative is focused

specifically on black people living with disabilities.

• 25 beneficiaries have

been trained and the second phase has commenced.

• Ten candidates from the

Moving Ideas competition have progressed into the Business Support programme.

• The top 10 SMMEs to be
• n the programme.
• A partnership between

Transnet and CVC Africa, a 100% black owned company that specialises in the development of SMMEs and start-up ventures, established two business incubation centres owned by military veterans.

• Training has

commenced and the premises identified.

CVC military veterans programme

R23 million spend since inception.

Young Movers and JASA Academy programme

R4,5 million spend since inception

Furniture manufacturing incubation

R18 million spend since inception in 2014 to date. To be completed in 2018.

Transnet BE BOLD programme

R1,4 million spend in the current year. To be completed in 2018.

Phuhliso fund

R50 million expected spend until completion.

Seed academy ICT

R0,5 million spend since inception.

Revenue and volumes

ENERGY CONSUMPTION & EFFICIENCY CARBON EMISSIONS

Freight commodities market share gains from road hauliers resulted in carbon emissions savings to the South African transport sector of 357 077 tC02e. 97 878MWh electricity regenerated by the new 15E , 19E, 20E, 21E and 22E locomotives.

tC02e - tons of carbon dioxide equivalent GWh - Gigawatt hours GJ - Gigajoule Gtk - gross ton km

2017 1 372 2016 1 330 +3,1% 103,4 2016 98,1 +5,4% 2017 18,7 2016 2017 +1,4% 18,4 +0,4% 65,7 2017 66,0 2016 10,64

• 2,0%

2017 2016 10,43 1,62 +3,9% 2017 1,69 2016 +7,5% 204,9 2017 220,4 2016

1% 5% 5% 6% 4% 10% 7% 49% 13% Break-bulk R1,9 billion Piped products R10,3 billion Bulk other R9,9 billion Manganese R12,5 billion Iron ore R8,9 billion Maritime containers R21,5 billion Coal R14,3 billion General freight R102,4 billion Automotive and other R27,5 billion

Seven-year capital investment by commodity (%)*

*Excludes R20 billion allocated to mergers and acquisitions.

Short- to medium-term outlook  Transnet’s results for the six-month period are exceptional in the context of a sluggish economy, with EBITDA growth of 17,7% underpinning this achievement.  The Company has demonstrated sound resolve in the continued implementation of the MDS, by enforcing strong financial controls.  Focus on: cost-containment initiatives, operational efficiency improvements, securing diversified revenue and capital optimisation by value engineering investments.  Aim to achieve capital spend of R229,2 billion (including R20 billion allocated to mergers and acquisitions) over the MDS period – investing between R340 billion and R380 billion over the next 10 years, aligned to validated demand, to expand capacity across all commodities and sectors.  Transnet has maintained a strong financial position and cash-generating capability, as evidenced by gearing of 44,0% and cash interest cover of 3,0 times, thus enabling the Company to continue to borrow on its owns strength, without government guarantees. Funding raised in the current period confirms Transnet’s attractiveness as a low credit risk investment. Long-term outlook  Management has adopted the Transnet 4.0 vision to accelerate MDS growth in the 4th Industrial Revolution.  The future is digital and the Company will use the latest technology intelligently, to implement real-time customer solutions and new product

• fferings.

 Establish infrastructure networks for the transmission of natural gas.  Accelerate growth in property, spatial development and maritime connectivity.  Fundamentally reinventing Transnet’s existing business model and operational philosophy:

• Extend Transnet’s footprint in Africa, the Middle East and South Asia;
• Become a fully integrated logistics service provider, with end-to-end solutions; and
• Establish an advanced manufacturing capability as an OEM for Africa.