Pressure group pushes for cleanout

By FRAN O'SULLIVAN

The Shareholders Association has called on Tranz Rail's institutional shareholders to pressure all nine directors to put themselves up for re-election at this year's annual meeting.

Association chairman Bruce Sheppard said yesterday that the institutions owed a duty to their investors to ensure that Tranz Rail - which has no cornerstone shareholder - took on new blood at board level.

Institutions that bought Tranz Rail shares from its two former major shareholders - Fay Richwhite and Wisconsin Central, at $3.60 and $3.70 a share respectively - have taken an estimated 30 per cent loss in value since then.

The company this week confirmed its operating profit would be $24 million-$26 million - $10 million below market expectations.

The Tranz Rail board is still dominated by directors associated with the previous shareholders.

"The institutions need to get together on this because they picked up the stakes," said Sheppard.

"They need to sit down with the incumbents and get some culpability."

Sheppard has also taken issue with Tranz Rail chief financial officer Wayne Collins' statement to the Stock Exchange on its accounting policies.

On Wednesday, Collins said the company had invested $169 million in track renewal and a further $17 million in track de-stressing since 1993.

"Over the same period a depreciation charge of $45 million on track has been applied to Tranz Rail's accounts.

"This treatment is entirely consistent with NZ and US accounting standards and is consistent with the treatment applied by comparable international railroad companies. None of the asset writedowns currently being considered by the company relate to its track infrastructure."

But Sheppard said the company needed to explain how the capacity of the network had been expanded.

"It certainly isn't in a whole bunch of branch lines which have been shut down or increased carrying capacity on the main line - so where is it?"

Tranz Rail shares closed down 2c at $2.48 yesterday.

* In Business tomorrow, Brian Gaynor runs his ruler over Tranz Rail.