KiwiRail delivers significantly improved surplus for FY21

31 August 2021

Solid revenue growth in our domestic freight markets has seen KiwiRail deliver a strong bottom line for the past financial year as the company continues building towards a self-sustaining financial future, KiwiRail acting chair Sue McCormack says.

KiwiRail Holdings Ltd, New Zealand’s national rail provider and operator of the Interislander ferry service across Cook Strait, today reported an operating surplus of $63.2  million in FY21 for the KiwiRail Group, up $23 million compared with FY20.

“There is much to be proud of in this result,” Group Chief Executive Greg Miller says. “A focus on cost control while lifting our commercial performance and attracting and retaining the right people for the right tasks, is paying off.   We’re focusing on leadership and have bounced backed well from COVID-19, with most parts of the business showing good revenue growth.

“Overall, revenue was up 7 per cent on the previous year to $681.6 million, and we will be building on that in FY22.”

The revenue growth came across most sectors, Mr Miller says. Road freight operators are also now among KiwiRail’s largest customers, and their business with rail is growing as the benefits of rail are understood.

Domestic and export revenues increased with forestry freight revenue up 7 per cent on the previous year, bulk freight up 11 per cent, domestic 13 per cent, and commercial vehicle freight on the Interislander up 2 per cent.

“Our container freight export revenue was on a par with the previous year, which reflects the ongoing turmoil in international supply chains caused by COVID-19.

“Closed borders continue to affect our tourism services, with a revenue fall from our three scenic trains. We reduced the financial impact by tailoring our timetables, fares and schedules to match demand, and retained our people, but this remains a difficult environment for tourism operators. We know our scenery is as good as any other train trip in the world and we look forward to better days ahead.

“FY21 also saw the Government continue its commitment to rail with a significant investment of $1.3 billion in Budget 2021, on top of previous investments of $1.2 billion in Budget 2020 and $1 billion in 2019.  This prepares us well for freight growth at the same time as we grow our skills and team capability to deliver on the $4.5 billion 10-year Rail Network Investment Programme. 

“We are grateful for this Government support, on top of investments through the New Zealand Upgrade Programme and the former Provincial Growth Fund to fund critical capital projects we are delivering which are truly revitalising rail for New Zealand. We have seen a roughly four-fold increase in our capital expenditure in the past five years with FY21 capex of $1.05 billion, compared with $257m in FY16. An $8 billion transformation of rail is underway and KiwiRail is growing its role as an essential and sustainable part of New Zealand’s supply chain.”

Mr Miller says the fruits of the Government’s investment are being seen in significant progress in making the rail network more resilient and reliable, as part of a concerted strategy to enable more freight to move from road to rail. That shift will be better for the environment and help KiwiRail reduce the need for government funding.

For example, in Northland, 700 workers in five months replaced five old bridges and increased the clearances in 13 old tunnels to allow hi-cube containers to be carried on the line.  The line opened in January and is now earning revenue and supporting the Northland economy.

Around the country, ageing rolling stock will be replaced and improvements are being made to the Auckland and Wellington commuter networks. An intensive effort in Auckland saw 600 infrastructure workers from around New Zealand converge on the network to replace and repair worn rails. Working around the clock, including through Christmas, they replaced 130km of rail; work which normally would be done over several years.

FY21 also saw the launch of the new Te Huia commuter service between Hamilton and Auckland.

KiwiRail signed a USD$369 million contract with Korean shipyard Hyundai Mipo Dockyard (HMD) for the delivery of two new, state-of-the-art rail-enabled Cook Strait ferries, with enhanced environmental performance through world-class energy systems and sophisticated onboard technology. The first ship will arrive in 2025 and the second in 2026.

“Safety remains critical to our business, and our unrelenting focus on the safety of our team saw impressive improvement in that area in FY21,” Mr Miller says.

The number of high-risk events fell significantly, dropping from 360 to 85 and the total number of recordable injuries fell to 223 in FY21 from 238 in FY20.

“We achieved this with a multi-pronged approach - focusing on the actions of our people, growing safety awareness, increasing assurance oversight and conducting high-level trend analysis to identify areas for focused improvement and to review site-specific issues and intervene before more serious events can occur.”

Mr Miller says KiwiRail is well on the path to sustainability and profitability.

“Rail is a valuable part of the New Zealand economy. An updated independent assessment of the economic benefits it delivers, released in May, shows $1.7 billion to $2.1 billion in value to New Zealand each year. Our customers care about reducing their carbon emissions, and KiwiRail does too, so we are taking them with us as we integrate improved environmental performance in the supply chain.

“The value of rail was also recognised in FY21 with the release of the first New Zealand Rail Plan, which lays out the Government’s 10-year strategy for rail network investment.”

Ms McCormack says the Board was grateful for the work that was being done by management and staff under Mr Miller’s leadership.

“We are making tremendous progress, and our customers are rightly expecting us to deliver a safe, reliable service for freight and passengers. That is a challenge that we are meeting.”

Ms McCormack and Mr Miller paid tribute to KiwiRail’s late chairman, Brian Corban, who died in office, in May. “Brian had a huge commitment to rebuilding rail in New Zealand. KiwiRail was very important to him, and he was very important to KiwiRail. We are feeling his loss.”