KiwiRail narrows annual loss

22:59, Aug 29 2013

Troubled KiwiRail has narrowed its losses as the state-owned transport company aims for financial sustainability by 2020.

The company had a net loss of $174.5 million for the year to June, compared with a $2.3 billion loss the year before.

Revenue rose 1.6 per cent to $727m, due in large part to a $10m increase in freight income.

The company said the true measure of its performance was its operating earnings before major items, a surplus of $108m, which slightly exceeded its forecast of $104m to $107m.

Chairman John Spencer said it was a good result, given the year's challenges, which included bad weather, a drought-shortened dairy season and freight shortfalls from Solid Energy.

Some hard decisions had been taken, including the sale of Dunedin's Hillside workshops and mothballing the Napier-Gisborne line.

However, revenue was up 25 per cent over the past five years, and freight revenue had lifted more than $100m in three years.

The company was expecting a good milk season, and there was "a feeling of quiet optimism" that some of the challenges of the past few years were being overcome.

Outgoing chief executive Jim Quinn said random weather and other events had taken a toll, erasing possibly $12m off operating earnings.

Storms and flood damage had cost the company at least $2m, and a threatened strike had cost $1.1m.

Other costs were harder to quantify. "It is a complex number." Capital expenditure had been curbed to $337m from $364m last year, with the money going into new locomotives, wagons and infrastructure.

Quinn said there would be bumps along the way as the company tried to narrow the gap between the amount it spent and the amount it earned.

The company is forecasting operating earnings of $120m next year and $310m expenditure.

By 2022, it expects expenditure will be the same, but ebitda will have risen to $280m.

Quinn said impairments would continue on a diminishing scale until KiwiRail hit its sustainability target.

For 2013, they were $399m, well down on the $2.19b the company wrote down last year, and ahead of the $200m to $250m anticipated in 2014.

In the freight business, growth was driven by forestry, up 9.4 per cent, and the import-export sector, up 8.1 per cent.

Bulk freight declined 7.4 per cent because of falls in milk and coal volumes, and domestic freight crept up 2 per cent.

Quinn said there had been good feedback on the Northern Explorer, the passenger train between Wellington and Auckland, which had seen a 12 per cent increase in patronage compared with its predecessor, the Overlander.

The TranzAlpine and the Coastal Pacific were expected to improve as the Christchurch economy recovered.

The Interislander reported operating earnings of $24.3m, up $4m on the previous year.

KiwiRail's full-year accounts will be published when they are tabled in Parliament.

Quinn's replacement has not yet been found. His contract will end in February.