Flood costs take their Toll on rail

By PAM GRAHAM

Toll NZ is very close to doing deals with Fonterra and Solid Energy that will increase the volume of goods being moved by rail.

Toll NZ yesterday reported a loss of $335.6 million for the year to June 30 after writedowns before the track was sold to the Government.

Operating earnings of $35.7 million were below the $48 million the company predicted before Toll Holdings of Australia took over, but the shortfall was mostly due to $8 million in costs relating to the floods in the lower North Island.

Toll took over Tranz Rail last October and rebranded the company Toll NZ in May.

It owns 84 per cent of the company and is blocked from full ownership by US fund Third Avenue and others.

Toll NZ's share price has surged to $2.26, double what Toll paid.

Toll Holdings managing director Paul Little said an offer around the current price could not be justified by Toll's investment criteria.

He joked that "we may even consider selling some shares".

Toll cannot buy any shares until a year after its last bid, unless it makes an offer to everyone.

The Herald understands that Third Avenue has refused to talk to the company. Toll NZ is not paying a dividend to minority shareholders.

The company's statement said its New Zealand investment was hard work, but it had been acquired at a significant discount.

Tranz Rail's major customers were so dissatisfied they banded together to form a lobby group. Now negotiations with Fonterra and Solid Energy are going well.

Solid Energy has signalled it is close to agreeing to a new contact with rail and Little confirmed that.

"With relation to Fonterra, there has been a lot of speculation about the development of a new distribution complex. I believe at this point of time Toll is in a very good position to supply those services to Fonterra.

"We have been in close discussions with them for some time and I think the outcome will be very positive for the company."

Toll NZ chief executive David Jackson would not elaborate, but sources said the talks were about a distribution facility in Hamilton.

Toll Holdings is seeking a stock exchange waiver to increase its funding line to Toll NZ from $200 million to $300 million, so it can redeem $100 million in bonds, maturing on October 15.

Toll Holdings itself reported its eighth consecutive record profit and said it was on course for another one this year. It is seeking acquisitions in Australia, NZ and elsewhere.