Umgeni Water performing soundly

2010-10-21 00:00

THE sound financial performance of state-owned enterprise Umgeni Water has continued, six years after the organisation began implementing a major turnaround strategy.

Umgeni Water recorded a surplus of R541 million in 2009/10, three percent higher year on year, amid stagnant volume growth and higher costs.

Profit from operations remained healthy at R618 million, four percent lower year on year. Revenue increased by nine percent to R1,63 billion, driven by a 6,5% bulk water tariff increase.

A key feature of Umgeni Water’s performance is its effective management of debt, said general manager for finance Nica Gevers.

Delivering the annual report for 2009/2010 in Durban yesterday, Gevers said net finance costs have been reduced by 31% to R80 million (2009: R116 million) “due to lower levels of borrowings and an increase in the amount of borrowing costs that were capitalised to work in progress”.

She said the reduction in finance costs cushioned the impact of other cost escalations, notably a 31% hike in energy costs. This cost-driver, as well as higher staff costs, drove bulk water cost per kilolitre almost seven percent higher to R2,03 from R1,90.

Umgeni Water’s tariff increase for 2010/11 was 6,2%, in line with the consumer price index for administered goods.

Gevers said the enterprise has set aside a liquidity buffer of R200 million to shield the organisation from late payments by municipalities.

Umgeni Water chief executive officer Mzimkulu Msiwa said Umgeni Water will distribute its R3 billion capex budget in three key areas, namely rural development (35%) expansion and growth (32%) and asset upgrades and rehabilitation (25%).

Chairperson Andile Mahlalutye said the surplus will be deployed in debt reduction, capital infrastructure investment, and the roll-out of sustainable and affordable water tariffs.

Msiwa added, “The results are good … but the Christmas is over. We’ve banked all the efficiencies. We need to find new growth options now.

“We’re thinking about the management of the recession and rising costs.”

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