Subscribe to RSSKiwiRail Remains Positive
KiwiRail’s annual report is putting a brave face on its result which misses targets and the company is also reportedly talking of a $6b writedown on assets.
The report says that to lift revenue by 2.6% and EBITDA by 29 % in the tough circumstances, combined with generally flat trading conditions, is a “considerable achievement.”
This result is consistent with the re-forecast provided in February, but below the Statement of Corporate Intent (SCI) targets.
The Christchurch quake and Pike River disaster along with trading conditions were difficult factors.
Revenue was $667m and EBITA of $100m.
The Chairman says: “We have achieved an increase in EBITDA, from $77.8 million in 2009/2010 to $100.3 million. This is a satisfactory result considering the direct impacts of the events mentioned above. We estimate that these events, and restructuring costs, resulted in a $15 million reduction in EBITDA performance against our budget.
Operating revenue of $667 million is 2.6 percent lower than the SCI projection, with an EBITDA result of just over $100 million, compared to $120.8 million in the SCI.”
KiwiRail’s asset valuation of $13b is not considered realistic and there’s a proposal to write down the assets by $6b and split into two entities – one the commercial arm and the other holding the rail corridor land.
KiwiRail continues to show optimism with its Turnaround plan saying yhe performance of the freight business was particularly encouraging with growth in all freight trading categories, bulk, domestic and import/export. Freight revenue increased by 8% to almost $400 million, approximately 60% of the company’s overall revenue.
Chairman John Spencer and CEO Jim Quinn write:
“Eighteen months ago, rail was at a crossroads, wondering what future it might have. Looking even further back, it’s impossible to escape the fact that the industry has lived hand-to-mouth for decades, surviving on a ‘No.8’ wire approach.
“The service-delivery problems that frustrated both freight and passenger customers are the direct result of under-investment in both network infrastructure and rolling stock over many years. Investment in the Turnaround Plan has given rail certainty about its future and given customers confidence they will receive the efficient and reliable service they want.”
Indeed, the stand-out performer in the report was import/export freight which increased revenues by 13 percent. The 8.1% increase in freight revenue from $367.1m last year to $396.7m was delivered across all major segments through a mix of volume and yield performance.
Passenger contributed 13% of KiwiRail’s revenue during the year but long-distance passenger numbers were 19% down on last year, reflecting a softening of tourism and the economy across the country.
Wellington Metro operator Tranz Metro recorded only a 1% increase in passenger numbers and a 4% increase in revenue. This is blamed on “slower than expected” commissioning of the new Matangi units, and on-going mechanical problems with the ageing Ganz Mavag and English Electric units, created a rolling stock shortage and resulting passenger disruption.
The 24% decline in Tranz Scenic revenue from $28.3m last year to $21.5m in the current year is a direct result of the ongoing impact of the Christchurch earthquakes. Passenger numbers on the Tranz Alpine were down 29% from the prior year and the Tranz Coastal (relaunched as the Pacific Coastal) was suspended from 22 February to 15 August 2011.
Referring to the job losses at Hillside workshop, they say:” We have great respect for the ability of the staff at Hillside to produce good work. However we have to face economic reality. We have to get the greatest number of locomotives, wagons and EMUs we can for the money we have available. We also need to get equipment onto the network quickly to generate the revenue we need to continue investing in the Turnaround Plan.
“As new rolling stock enters service, the task of maintaining it changes. Apart from the obvious reduction in servicing needs, it makes sense to operate more regionally. By working more closely with Freight and Network at a regional level, Mechanical will be able to provide faster and more pro-active support.”
8 Comments
There are plenty of ways Kiwirail could be running their passenger services more effectively, so I don’t exactly have sympathy for them. Why stop the Tranzcoastal when plenty of people could’ve used the service to get in and out of the city? Why keep the Tranzalpine, but NOT have Southerner service to Dunedin and Invercargil, which have higher populations and expensive airfares??? For rugby world cup especially they could have done a lot more with the tourism that was here, such as tourist trains to Rotorua, Dunedin, even New Plymouth. I don’t know much about freight, but it seems they may be relying a bit too much freight alone and not enough on passenger.
Funny they are proposing a split in the business, the operating business called Kiwirail and another for the land and tracks. Perhaps they could call that division ONTRACK?
The more things change, the more they stay the same!
not recreating Ontrack, but the New Zealand Railways Corporation. NZRC was originally established in 1990 in preparation for privatisation….
They always owned the alnd under the rail tracks right throughout private ownership, but evolved into Ontrack when the tracks were brought back.
The more things change, the more they stay the same!
I think it’s just the land being split off, not the tracks.
Isn’t this a repeat of the of the Wisconsin Central Railway, Berkshire Partners and Fay, Richwhite fiasco of 1993, where NZ Railways Corporation (Est 1982 under the New Zealand Railways Corporation Act 1981) created New Zealand Rail Ltd & sold off by National for $400 million?
Its increasing apparent, that Kiwirail Ltd is on National’s list of asset sales when they get re-elected.
This time the Government (through NZ Railways Corporation) will hold 51% of shares in Kiwirail Ltd & the remaining 49% will be held by private investors, probably by the Chinese Government through their investment company.
This is an article in yesterday NZ Herald about Kiwirail Ltd $6 billion asset write down -
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10762258
It is following the Booz Allen Hamilton report of 1984 to the then National government on how a viable rail network could be created. The report recommended, amongst other things:
-> Reducing staff numbers
-> Re-orienting freight services towards bulk commodities
-> Increasing the length and weight of freight trains
-> Rationalising the locomotive and wagon fleet
-> Rationalising railway workshop
-> Re-focusing long-distance passenger services towards tourists.
With the two agreements concerning the Auckland & Wellington suburban networks rolling stock & stations being handed over to the Greater Wellington Regional Council & Auckland Transport, it means that Kiwirail Ltd has disposed of the suburban networks from Rail Passenger Group.
This makes way for Rail Passenger Group (Tranz Scenic/Kiwirail Passenger services) to be set up as a separate company 51% owned by NZ Railways Corporation & the remaining 49% will be held by a joint venture partner possibility CAF of Spain.
It is interesting to note, that CAF has established a NZ company and with it experience in managing/operating rail networks around the world and providing the EMU’s for Auckland, it would a good
We all know that Kiwirail Ltd lacks entrepreneurial flair and is conservative in its business dealings, its going to be interesting to see how it the ‘New’ Kiwirail is going to perform under private investors?
I wonder if ONTRACK brand will be re-created as NZRC’s infrastructure arm??
Here we go again…..
That was my thought when I first read about this.
The only operator I would support selling the rail network to would be SBB-CFF-FFS, but they probably wouldn’t want it!
Looks like we’re stuck with it.