KiwiRail Posts $117m Deficit


KiwiRail has posted a first- half net deficit of $117.6m,from a loss of $123.5m a year earlier, after accounting for depreciation.

Chairman John Spencer says the depreciation of $137.7m had a significant effect on creating the net deficit after tax of $117.6 million.

“The depreciation figure reflects the underlying valuations of our assets,” he said. “We are currently seeking to determine if a more realistic carrying value would be appropriate. ”

But despite difficult economic times, the chairman was relatively upbeat about how KiwiRail is doing.

“Despite a comparatively flat economy and severe challenges posed by earthquakes, the business increased its operating revenue and most significantly, its operating profit before depreciation and grant income,” he said.

“This performance has been achieved on the back of strong growth in freight volumes and revenues, reflected in the overall growth in freight revenue of more than thirteen percent.”

KiwiRail has reported an increase in operating revenue of five percent on the corresponding six months, up from $310.4 million in 2009 to $326.1 million. In spite of the challenges encountered during the six months, operating expenses were held to an increase of only 0.3 percent over the 2009 figure.
Operating profit before depreciation and grant income (effectively EBITDA) of $43.3 million increased 66 percent over the comparable period in 2009-10.

“In the Board’s view, EBITDA is the most significant measure for the business’s core operations because it reflects the cash being generated by the business as a whole,” said Mr Spencer.

“The result represents a timely endorsement of the work being done as part of the Turnaround Plan to increase freight revenue by strengthening the rail ‘spine’ stretching the length of the country and improving service .”

Bulk, domestic and import-export freight, carried on the rail network and across Cook Strait on Interislander ferries, is the cornerstone of the KiwiRail business. Including the Interislander business, it generates more than 60% of revenue.

Mr Spencer says that for a number of years, the volume of freight carried by rail has been static or declining. But in the first six months of the 2010 financial year bulk freight net tonne kilometres carried increased by almost 20%, import-export goods by more than 12% and domestic freight goods nine percent.

“An encouraging sign is the growth of domestic freight that has come from outside KiwiRail’s already established customer base. Growth of more than 200 percent in this traffic points to rail representing a more relevant and customer focused service than in the past.

“Growing the base of domestic customers is fundamental to achieving the objectives of the 10-year Turnaround Plan,” he said.

Bulk freight revenue was up almost 13% , Import-export, 12% and domestic, the freight source critical to the Turnaround Plan, up almost 16%.

While other parts of the business did not manage growth on the same scale, they still improved on their performance in the previous year. The exception was long distance passenger services, which suffered from adverse trading conditions and service disruptions.

Interislander increased its overall revenue for the six months by 4% on last year. Commercial vehicle traffic increased by 16%, reflecting the increased freight volumes moving south after the initial Canterbury earthquake.

However, passenger traffic reduced by 6%, considered a likely consequence of tight economic conditions, fewer people travelling, increased competition on Cook Strait and resulting competition for passengers. These challenges are likely to apply for the remainder of the financial year.

Mr Spencer said the Wellington metro business, affected by delays and the work being done to upgrade the network,  appears to be stabilising passenger volumes. Passenger volumes for the six months were only down 1%, a significant improvement on the previous six months.

Overall, Mr Spencer believed that the results achieved during the first half of the financial year are consistent with a slowly improving economy and the benefits efficient rail operations can provide to freight forwarders.

“Overall economic growth in New Zealand appears to be slowing, This is reflected in trading results for the early months of the second half year.

“In the second half of the financial year, we face a number of challenges. A dry spring and early summer has reduced milk volumes we have been carrying and depressed retail trade is affecting domestic volumes.

“We will have the ferry Aratere out of service for four months while an extension is fitted and we are still working on finding a substitute.”

He said that given the inter-relationship between economic conditions and freight volumes, business activity may not be as strong in the remaining months of the year as it was during first six months. This will be exacerbated by the reduction in coal and freight volumes as a result of the tragic earthquake in Christchurch.





  1. have a look at the ‘recent posts’ column on the website!

    KiwiRail Posts $117m Deficit
    Featured | March 2, 2011

    Odds Change For CBD Link
    Auckland, Featured

    Woeful Punctuality
    March 1, 2011

    New Train Fares: What You’ll Pay
    March 1, 2011

    one would have to wonder

  2. Cam says:

    Wonder what exactly Richard? Not sure I follow?

  3. tim says:

    What a horrible return on the taxpayers investment here! With a high level of fixed costs, once would think any revenue gains would have larger impacts on the bottom line.

    KiwiRail really needs to up its game as its competitors did better over the same period without government subsidies. The most notable difference is that while the rest of the industry provides employee incentives, KiwiRail pays flat remuneration rates which are particularly generous for upper management and executives - definitely something to be investigated by the Minister.

  4. Luke says:

    this is a very good result considering our economy has not grown at all this year. As Kiwirail has high fixed costs they will always be hit hard by economic downturns, but they need to be run on a long term basis.
    The deprication needs to be ignored as this purely occurs because the rail network was valued at $10.5 billion a couple of years. including this is like saying the land transport budget loses $500 million a year, when this is just accounting trickery.

  5. George D says:

    If roads were costed in the same way, they’d be running at a loss of billions per year.

    The only logical answer is to rip up loss-making roads, including most highways and motorways. After all, if they don’t make a profit, they’re not worth having.

  6. AKT says:

    Sorry the edit function is not playing nice. Working on it.
    An absolutely FINAL reminder: Personal abuse to other commentators is not acceptable.

  7. Jon Reeves in Switzerland says:

    Yes Tim - the competition you suggest is much better, the trucking companies, unlike KiwiRail, do not have to pay and manage the infrastructure they use.

    Trucking companies are subsidised by taxpayers for State Highways to the tune of a whooping great $1.5 BILLION per annum. Add on top of that the fact ratepayers pay upto 50% of their rates for local roads….. your favourite trucking companies are really riding on the camels (tax and ratepayers) back.

    KiwiRail seems to actually have done well, and now you are aware of the FACTS, I am sure you would agree.

  8. Simon says:

    And I wonder if trucking companies would do so well if one of their main customers went completely belly up like Pike River mines - that was a major revenue stream for Kiwirail that quite a bit of capital effort had been put into to develop further, now in vain.

  9. tim says:

    Funny how Mainfreight’s profit for last 9 months is up 20% to $18 million, it’s executives get paid less and it relies on bank debt, not taxpayer gifts to fund expansion.

    I also add that KiwiRail’s depreciation charges seem too low given all the money they’re spending on new infrastructure and equipment. I reckon their profit’s going to plummet unless they really start thinking differently and get better value for all the money that’s being spent.

  10. Luke says:

    mainfreights profit is largely based on overseas expansion. Yes they are a very smart company, hence their strategic relationship with Kiwirail and major investment in rail terminals, like at Wellington next to the stadium.


Leave a Comment


XHTML: You can use these tags:
<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>