Tranz Rail now expects $40m operating profit

1.00pm

Stricken rail operator Tranz Rail today said it expects to return an operating profit of $40 million for the 2002/03 year.

The company pinned the less-than-expected profit to soft trading results, particularly in its rail services group.

After foreign exchange gains on the Aratere ferry lease of $12 million and a $4.5 million tax credit Tranz Rail expects a net profit after tax of $30 million.

Factors behind the result were a change in accounting treatment of some sales, and additional expenses related to various asset sales, the company said in a statement.

Tranz Rail has been selling assets to pay debt after falling freight revenue cut earnings. Its parlous state stems from liquidity problems and debt, rather than profit.

The company's credit rating was cut to CC by Standard & Poor's last month on concern it would not be able to make debt and lease payments.

Tranz Rail's shares were up 2c to 91 at 10.50am this morning.

In the 2004 year it now expected a net operating profit of $48 million.

Meanwhile, Melbourne-based company Toll Holdings on Friday revised its bid to buy Tranz Rail, upping its offer by 20c to 95c a share and taking a relaxed stance on ownership of the track network.

The Government has also thrown the rail operator an offer of a financial lifeline, including it taking a 35 per cent stake through a rights issue at 67c a share.

Tranz Rail and the Government have signed a heads of agreement, which includes the rights issue, an immediate $44 million injection, buying the national rail network for $1, paying $50 million for associated assets and spending $100 million over five years on network maintenance.

- NZPA