Tranz Rail posts plunging profit

By Dita De Boni

Tranz Rail has hauled 10 per cent more freight in the last 12 months, but not enough to stop earnings before interest profit plunging from $81.8 million in 1998 to $31.4 million to June 30 of this year.

The company blamed many factors, including a reduction in average rates caused by competitive pressures, for less-than-stellar annual results released yesterday.

Its net profit of $70.2 million was a substantial increase on last year's $48.2 million, but was boosted by a change in the company's tax treatment giving a $57.3 million tax credit.

Revenue for the year was down $8 million, or 1.4 per cent, to $569.2 million from the previous year. Abnormal items of around $37 million saw operating costs increase $42.4 million to $537.8 million - more than 8 per cent.

A year-end provision of $15.5 million for redundancy costs provided for a further whittling away of the workforce - down from 25,000 since deregulation of the industry in 1984 to 4285 at June 30.

Transport analyst David Fraser said the results were "incredibly complex", not least because the company had grouped passengers and freight together in one category in order to obscure earnings off the inter-island passenger ferries, in heated competition with rival Topcat Ferries.

Mr Fraser said the company's results reflected a renegotiation of long-term contracts and a still-sluggish economy.

He said as a fixed-costs business, Tranz Rail would prosper when its revenue increased alongside additional volume and that the best the company could do was "wait for the economic recovery".