Tranz Rail meets targets as quarterly loss doubles

By PAM GRAHAM

Tranz Rail yesterday reported a first-quarter bottom-line loss of $14.2 million, slightly more than the $13.3 million loss it forecast in July because of a change in finance costs and lease write-offs.

The loss for the three months to September 30 was nearly double the firm's $7.5 million loss for the same period last year.

Chief financial officer Wayne Collins said discussions in the US last week with investors behind the sale and lease back agreement for the Aratere ferry were productive and "we are a long way toward a commercial resolution".

The investors can ask for a letter of credit after Tranz Rail was downgraded below investment grade. They have not done so and negotiations are continuing. Analysts say the rail operator can offer more security or pay more in interest and therefore interest costs may rise in the future.

The issue must be resolved before Tranz Rail can renegotiate its banking facilities and decide how to raise new capital.

Tranz Rail shares, which peaked at $9 in 1997, rose 2c to $1.53 yesterday. They have declined 62 per cent this year.

In the same period last year Tranz Rail reported an operating profit of $1.2 million, down from a profit of $5.8 million the previous year.

"We look to continue to meet all operational targets for the balance of the year," Collins said. "That's the picture for this first quarter."

He forecasts profits for the next three quarters will produce earnings before interest and tax of $55.8 million in the year as export and holiday seasons pick up in subsequent quarters.

Tranz Rail has altered how it accounts for lease of the Aratere and that was a factor in an $800,000 rise in interest expenses and amortisation compared with the July forecast.

Collins said that in July the company had taken a conservative view and assumed a higher writeoff and lower interest costs on the lease for the period but after discussion with auditors a lower writeoff and increased amortisation of interest costs was decided upon.

Analysts estimated $450,000 of the $800,000 related to the Aratere lease.

He hoped better-than-forecast revenue from forestry was sustainable, and that P&O Nedlloyd's decision to use fewer ports for its weekly European service would benefit Tranz Rail's revenue and profits.