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KiwiRail growth momentum 'still on track'

Contributor:
Fuseworks Media
Fuseworks Media

Over the last three years KiwiRail has increased revenue by over 25 percent, with freight revenue growing by over $100 million in the same period, Chairman John Spencer said today at KiwiRail’s Annual Public Meeting in Christchurch.

"In the last year the KiwiRail group achieved an operating surplus of just over $108 million, compared to the mid-year forecast of up to $107 million, and revenue increased by $11 million to $727 million," he said.

"The freight business, which earns 60 percent of overall revenue, has continued its growth momentum with their revenue result of $467 million a nine million increase from last year."

"This result, and the other streams of work going on to improve both productivity and safety within the business, shows that the momentum to turnaround this business has not abated since the company was established just over five years ago."

Over the last four years capital expenditure, excluding the hundreds of millions spent on upgrading the metro networks, has exceeded $1.3 billion. This includes $750 million from Government and $620 million from KiwiRail’s earnings and other sources such as grants and land sales.

"We simply can’t improve and grow the business unless we continue to invest in new equipment and better infrastructure," said Mr Spencer.

"We have spent over $300 million in the last financial year on 20 more new locomotives, 300 new wagons and rail infrastructure upgrades."

"This has directly led to improvements in safety, for example maintaining a decade long low in mainline derailments, on time performance, utilisation and freight capacity."

KiwiRail held its Annual Public Meeting in Christchurch this year to coincide with the 150th anniversary of rail celebrations being held over the weekend in the city.

"We are also pleased to be here in Christchurch to help celebrate this important milestone. I think it is fair to say that rail in New Zealand has undergone many changes over time, but due to the ambitious programme to reverse the years of underinvestment the company is growing and improving every day."

Mr Spencer went on to say while he was pleased with the company’s progress despite the challenges faced during the year, he was disappointed in missing the Statement of Corporate Intent (SCI) targets.

"We have estimated that the combination of damage from severe weather events, the drought negatively affecting the milk season, threatened industrial action against Interislander, and the reduction in Solid Energy’s coal volumes combined with their unsustainable contract prices, reduced our surplus result by at least $20 million."

"As a result, while revenue was only one percent below our SCI target, our operating surplus was nine percent below the $119 million target.

On the 31st of December a restructure of the company was implemented that resulted in the assets and liabilities of the New Zealand Railway Corporation being transferred to KiwiRail Holdings Limited, a new State Owned Enterprise.

"This decision was made so that the company is valued on a commercial basis as our assets need to reflect their productive value," said Mr Spencer.

According to Chief Executive, Jim Quinn, the business has continued to grow while maintaining its improvement programmes over the past year and he expects this momentum to continue.

"The freight business is gaining more customers and has continued to increase tonnages from the Import Export, Forestry and Domestic sectors," he said.

"But the last quarter was disappointing due to the combined effects of the Fonterra botulism scare, disruptions due to severe weather and ongoing reductions in bulk freight due to Solid Energy’s issues."

"Looking forward there has been an increase in domestic freight and we expect this to continue as we head into the peak season. There has also been a very positive start to the dairy season after the mild winter which will boost the Import Export tonnages."

"And with the Interislander’s refurbished ferry Kaitaki back in operation, and the busy holiday season coming up to help boost the long distance Scenic passenger services, we are cautiously optimistic that we can continue to improve our financial result."

Continuous disclosure

KiwiRail’s financial results for the twelve months ended 30 June 2013 have been released 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 were tabled in Parliament on 9th October, 2013.

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