Tranz Rail announces net year loss of $2.6 million

10.00am

Tranz Rail, target of a takeover offer, today announced a net year loss of $2.6 million, compared with the previous year's $122.7 million deficit.

Tranz Rail's operating profit from trading for the year ended June was $40 million, down on forecasts but better than the previous year's $25.2 million operating profit.

In June the company downgraded its operating profit forecast for 2004 to $48 million from $78 million.

Managing director Michael Beard said the net loss was lower than that put to the market in mid-June, as a result of the company taking a conservative view of its tax position during the year end and audit process.

The impact was a $32.7 million non-cash tax expense, relating to an impairment of tax losses.

The fourth quarter operating profit of $14.8 million was up 59 per cent.

"While we did not achieve our original forecasts it is however important to acknowledge the increased operating profit we have achieved for 2003," Mr Beard said in a statement today.

During the financial year Tranz Rail negotiated new bank facilities through to June 2004; renegotiated the terms of the lease on the interisland Aratere ferry, which resulted in multi-million dollar foreign exchange gains; and undertook a capital raising of $65.2 million by a 5 for 7 rights issue of new shares at 75c each.

"Current operating trading and cash flows are coming in ahead of budget. The company has sufficient cash facilities to cover seasonal lows in the first quarter of the 2004 financial year" Mr Beard said.

Tranz Rail said it had halted a decline in freight, moving a record tonnage.

"Total bulk revenue was 2.1 per cent ahead of the previous year, despite the effect of the drought conditions on the dairy season that affected milk volumes, and the strike at the Kinleith mill that affected forestry traffic.

"This increase was mainly due to coal revenue, which was 16.1 per cent ahead of the prior year despite service issues relating to the Otira tunnel, which have now been resolved."

Total operating revenue was $609.7 million, up from the previous year's $601.83 million.

The company has suffered from a string of profit and credit-rating downgrades that have sent its share price plunging from $4.30 in March 2002.

During the financial year, with its share price on the slide, Tranz Rail was subject to four takeover offers and speculation of a fifth.

After initial offeror RailAmerica exited in May, Australian logistics Toll stepped in, followed by the Government, before the two combined in a separate offer.

America's Genesee and Wyoming were also expected to enter the bidding fray recently, although they have not.

Toll's offer of 95c per share closes on September 26, conditional on 90 per cent acceptances.

The Government has agreed to buy the rail network for a token $1 and upgrade it if Toll's bid succeeds. Toll would get exclusive use of the tracks, but would have to invest in rolling stock and locomotives.

Tranz Rail relied on a Government downpayment from the initial government offer, centring on a track buyback deal, to meet its obligations in June.

Tranz Rail shares were unchanged at 99c after the result was released, compared with a low of 30c in April.

- NZPA