KiwiRail achieves forecast operating surplus result as growth continues
30 August 2013 10:10AM
Due to continued growth from the freight business KiwiRail is pleased to report that it has slightly exceeded its forecast result achieving an operating surplus of just over $108 million, compared to the expected range of $104 to $107 million. Revenue increased by $12 million to $727 million, with freight revenue of $467 million a $10 million increase on the previous year.
“This is KiwiRail’s fifth year of revenue growth,” said Chairman John Spencer. “Since the company’s establishment, despite the global economic downturn and the impact of the earthquakes, we have still managed to increase overall revenue by over 25 percent since 2009, and freight revenue has grown by over $100 million in just three years.”
“Alongside this growth, investment in the business to improve performance and robustness has also continued with capital expenditure of $337 million for 20 more new locomotives, 300 more wagons, and on-going infrastructure upgrades.”
Over the last four years capital expenditure on new rolling stock, equipment and network upgrades, excluding the hundreds of millions spent on the metro networks, has exceeded $1.3 billion.
“While this continued growth provides a level of confidence in our ability to achieve financial sustainability by 2020, the company still has a long way to go and we have to remain focused on achieving our strategic objectives, while keeping a close eye on costs and further improving safety.”
Over the past year hard decisions have had to be made to ensure the focus on building a commercially viable business was maintained.
“Decisions such as the sale of Hillside Workshops, restructuring the Infrastructure and Engineering business, and mothballing the Napier to Gisborne line are not made lightly,” said Mr Spencer.
“This has been a very challenging year for our people and the community, not just because of the impact of these decisions, but also having to manage the huge disruptions nature has thrown at us.”
“We have estimated that the storms and flooding that damaged the network from south of Dunedin to the middle of the North Island has cost us at least $2 million.
Most of the growth in rail freight has come from increases in the Import Export and Forestry sectors at 8.1 percent and 9.4 percent respectively. Domestic freight increased by just over two percent, but Bulk freight declined by 7.4 percent due to the difficulties Solid Energy is facing and the drought affected milk season.
“We are continuing to work with Solid Energy on their expectations for future business and ensuring there is a sustainable rail freight contract to meet their changed future needs,” said Mr Spencer.
“Freight growth is expected to continue this year, particularly if we get a good milk season. But we know there is still more business out there for us, and the new rolling stock, and our on-going focus on improving our customer service, are key to putting more freight on rail.”
The performance of other parts of the KiwiRail business have led to a feeling of quiet optimism that some of the challenges experienced over the last few years are being overcome.
“With the introduction of new carriages and a renewed marketing approach there is some confidence that the Scenic passenger business is slowly improving,” said Mr Spencer.
“The re-launched Northern Explorer has performed better than budget and seen a 12 percent increase in the number of passengers per service in comparison to its predecessor the Overlander.”
“While there is still some way to go for this part of the business to be profitable again, as the Christchurch economy recovers, we expect the TranzAlpine and Coastal Pacific to grow passenger numbers.”
The Interislander business has reported operating earnings of over $24.3 million, an increase of almost $4 million from the previous year.
“This is primarily due to the business being able to increase market share from both the passenger and freight sectors.”
“Over the coming year they will continue to focus on growing their business, while looking very closely at areas where they can reduce costs such as fuel consumption while also increasing utilisation levels.”
Mr Spencer said the main effort over the coming year will be on increasing productivity and further embedding a safety focused culture.
“KiwiRail has made a commitment that we will improve our safety record and we have ambitious targets. But there is nothing more important to us than ensuring the safety of our people, customers and the community in which we operate.”
“Now that a large part of the foundation work has been completed, or well underway, we are looking inward at what further improvements need to be made to our culture and operational capability.”
KiwiRail’s financial results for the twelve months ended 30 June 2013 are released today in accordance with the company’s continuous disclosure policy - consistent with the Government’s Continuous Disclosure Rules for State Owned Enterprises which came into effect from 1 January 2010.
KiwiRail’s full year accounts will be published when they are tabled in Parliament.