Citadel says rail venture on track to profitability
An RVR locomotive at its Kampala station. Citadel Capital has announced improved fortunes from its investment in the rail firm. Photo/FILE
What you need to know:
Subsidiary owning stake in Rift Valley Railways (RVR) made $71.2 million in 2013.
The firm still made a loss from its investment in RVR but said this was due to costs related to financing the venture and not from operations or the core business.
Citadel Capital has announced improved fortunes from its investment in Rift Valley Railways (RVR) for 2013, weeks after its other large co-shareholder, TransCentury Ltd, announced it had exited the business.
The investment firm’s 2013 fourth quarter results showed Africa Railways, the subsidiary that is the majority owner in RVR, could be on track to profitability after positive earnings achieved between June and September 2013.
Citadel still made a loss from its investment in RVR but said this was due to costs related to financing the venture and not from operations or the core business.
“EBITDA has gone slightly back to the red, reaching negative $0.3 million (Sh26.3 million) in fourth quarter, after having achieved the first profitable quarter in the company’s history in third quarter of 2013 ($6.6 million or Sh579 million). This drop was due to one-off financing issues related to debt funding that are currently being resolved,” said Citadels fourth quarter results for 2013.
Overall Africa Railways made $71.2 million in revenues in 2013, a 5.1 per cent increase from $67.7 million posted in 2012.
Losses in the full-year decreased to $3.9 million from $9.9 million over the same period.
Africa Railways had a 51 per cent stake in RVR in 2013, which has since increased to 85 per cent after TransCentury sold its 34 per cent stake to Citadel in April.
Uganda’s Bomi Holdings owns the remaining 15 per cent.
TransCentury declined to comment on the numbers saying it did not know how Citadel accounted for the results.
“In regards to RVR’s fourth quarter profits reported by Citadel, we cannot comment on this as they are best placed to answer how this was realised,” said the firm in a statement.
The infrastructure and power firm that is listed on the Nairobi Securities Exchange however said it decided to leave the rail business because it was not making enough returns.
“The decision was made due to the delayed turnaround of RVR, which meant that this investment failed to meet return targets set by the Group,” said TransCentury chief executive Gachao Kiuna in the 2013 annual report.
Instead the firm said that it had found more attractive businesses where its capital can be better invested.
“The cash realised from the disposal of RVR will be redeployed towards other higher return investment opportunities that will improve both the financial position and future profitability of the group,” said TransCentury chairman Zeph Mbugua.
TransCentury has previously said it is bullish on the oil, gas and mineral industries where it already has a foothold through its subsidiary Civicon which is currently servicing Tullow Oil by constructing supporting infrastructure.
RVR was awarded a 25-year concession to operate the 2,350 kilometre line from the Port of Mombasa to Uganda in 2005 and Citadel first entered into the concessionaire in 2010 and says that it plans to inject more capital in the company.
“RVR is purchasing 20 GE locomotives from the United States, with the expected delivery of the first batch in July of 2014. With the ongoing loco rehabilitation programme, the company expects to double the current locomotive fleet by end-2014.”
RVR also rehabilitated the 500-kilometer Tororo-Pakwach railway which is strategically located near where Tullow Oil found petroleum reserves and culverts in Jinja.
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