KiwiRail posts $85.5m 'above-rail' full year earnings, despite falling freight

KiwiRail, the state-owned rail and freight operator, posted earnings before interest, tax, depreciation and finance costs of $85.5 million in the year to June 30, down $5 million on the previous year despite a 300,000 tonne reduction in Solid Energy coal freight and lower milk volumes because of a shorter-than-normal season.

Revenue for the year fell 3.7% to $694 million, while operating expenses improved by 1.9%, falling to $618.9 million as the business reorients to being as efficient as possible in what it calls its 'above-rail' business, while continuing to book government-subsidised losses once the costs of the country's rail infrastructure are taken into account.

The ebit result is in line with the company's Statement of Corporate Intent targets. It does not pay dividends to the Crown.

Strong growth in tourism numbers saw the Scenic Journeys passenger trains clock up a 19.8% increase in revenue, although the segment remains the company's smallest, at $29.7 million.

Freight revenues fell 10.1% to $389.8 million, the Interislander ferries' turnover was flat at $127.6 million, and Tranz Metro suburban passenger train services generated 11.2% more revenue than the previous year, at $59.7 million.

The statutory loss for the year was $194 million, up from $166.5 million the previous year, with the government having committed to inject sufficient capital into KiwiRail on an ongoing basis to allow it to keep operating as an integral part of New Zealand's transport network, even though the volume of freight on the relatively long and lightly used rail system is unlikely ever to run at a profit when the cost of infrastructure is included.

Contributing to the larger loss was also a 26.2% reduction in capital grants from Auckland and Wellington regional transport bodies as passenger network upgrade projects undertaken by KiwiRail in both cities wind down.

Chairman John Spencer said in a statement that KiwiRail had achieved "a strong financial and operational result."

Import/export freight volumes had grown 11%.

Chief executive Peter Reidy said in an interview that the company had successfully reduced its cost base and expected to book savings of $27 million this year, with an annualised value of $38 million.

However, decisions such as leasing a new ferry - a way to preserve capital – had an ebit impact since the lease costs now flowed through the expenses line in the accounts.

Reidy said KiwiRail was confident Solid Energy, which is undergoing sale in a distressed state, would continue to produce around one million tonnes of coal in the current financial year, roughly the same as last year.

The state-owned coal company had "some offers on the table" and decisions to make.

"At this stage, we're comfortable they will be continuing operations," says Mr Reidy.

(BusinessDesk)

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