Tranz Rail nine month trading profit 18 per cent below forecast

10.30am

Troubled rail operator Tranz Rail said today its year-to-date operating profit from nine months of trading was $30.3 million, 18 per cent below forecast.

The company said third quarter financial performance fell short of its previous expectations and was consistent with advice given to the market early last month.

"Third quarter performance was largely affected by the impact of climatic conditions and an associated downturn in the rural and commodity sectors," Tranz Rail said.

Revenue for the quarter was $157.2 million, $11.3 million below forecast, while operating profit from trading was $19.1 million, $10.2 million below forecast.

Shares in Tranz Rail - which have fallen steeply in recent weeks after the stock was downgraded to virtual junk status by ratings agencies -- traded up 5c at 45c following the result.

Tranz Rail said earnings at its rail services division were hurt by recent drought conditions, the Kinleith pulp and paper mill strike, and lower coal volumes due to service issues related to the Otira tunnel.

Its Interisland ferry service was affected by increased competition for passengers on the Cook Straight. Tranz Rail said late last month it was introducing a new freight ship to its fleet in June and mothballing its Lynx fast ferry from service during winter.

The company expects these changes to save $5 million a year.

Its distribution services group continued to trade in line with forecast, while its rail passenger division was affected by reduced passenger volumes and subsidies as a result of the January heat buckling issues.

"We have made progress but are aware that we do need to make greater gains in the future," Tranz Rail said.

In April, Tranz Rail revised down its forecast year-end earnings before interest and tax (ebit) to $47 million from $53.1 million.

That saw Tranz Rail's share price plunge to an all-time low of 30c, from 95c ahead of the profit warning.

It made a net profit of $1.9 million in the six months to December.

- NZPA