Tranz Rail picks better year following costly restructure

By DANIEL RIORDAN transport reporter

Halfway through its restructuring programme, Tranz Rail expects the benefits of the changes and other initiatives to result in a better financial year than the one just ended.

The company yesterday reported a net profit of just $5.6 million for the latest June year.

This compared with the previous year's $46.9 million, but was in line with analysts' expectations.

Chief financial officer Mark Bloomer said the true cost to the company of its first year of restructuring was more than the $21.3 million shown in the accounts.

That figure included redundancy and ferry configuration costs but not the indirect costs of change relating to labour, consulting, training, travel and communications.

Revenue was 5.7 per cent higher but this was more than offset by a 11.4 per cent increase in operating costs.

Passenger revenues were up 13 per cent and freight revenues by 4 per cent, with rate increases offsetting a 3 per cent fall in tonnage carried.

%Manufactured %volumes carried were down 15 per cent, reflecting the sluggish state of the domestic economy.

Mr Bloomer said he expected the current financial year to be better.

"Some of the [restructuring] initiatives will be completed and we'll be getting the benefits of that," he said.

The company lost $800,000 in the final quarter (including reorganisation costs of $4.8 million), compared with a profit of $8.4 million for the same period of the previous year.

Freight volumes for forestry, manufacturing and coal were lower, but agricultural, fertiliser, minerals and aggregate volumes were higher.

He said negotiations with the Government over the lease of the Auckland rail corridor should be completed by the end of this month.

Four New Zealand and six overseas parties had made indicative bids for Tranz Rail's infrastructure, locomotive and wagon businesses and a decision on these should be made by the end of the year.

The 1100 staff involved had been assured of jobs with the new owners on existing conditions.

Mr Bloomer said the company was still talking with Ports of Auckland about setting up an inland port at Palmerston North.

He said Tranz Rail had not received any indication of which additional passenger services the new Tranz Scenic owner, West Coast Railway, might elect to keep open.

A decision on a dividend payment will be made at the company's board meeting on August 15.