Friday 28th February 2014
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KiwiRail, the state-owned rail service, has cut its forecast operating profit as the outage of the Aratere inter-island ferry weighs on earnings, and is in talks with the government to ensure it has enough cash to last the rest of the year.
The Wellington-based state-owned enterprise reported a 21 percent drop in operating profit to $37.3 million in the six months ended Dec. 31, as a 0.7 percent gain in revenue to $365.5 million was outpaced by a 3.9 percent lift in expenses to $328.2 million. The full results won't be made public until they are tabled in Parliament. The SOE said it has renewed focus on cutting costs in new recruitment and major capital purchases.
KiwiRail cut its forecast operating profit to between $90 million and $100 million in the year ending June 30, a reduction of $20 million to $30 million from its Statement of Corporate Intent. It estimates the outage of the Aratere ferry, which is undergoing repairs after its propeller fell off in November, will cost between $20 million and $30 million in the financial year.
"The financial impact is significant and we are doing all we can to mitigate that impact," chairman John Spencer said. "We are also in discussions with our shareholder to ensure we have the necessary financial capacity for the remainder of the year."
KiwiRail has previously said it doesn't expect to make a net profit within the next decade as it writes down the carrying value of its assets to market value, while investing in renewing its network.
The company's domestic freight sector grew 11 percent in the period on increased export and liquid milk volumes, and anticipates further growth in log volumes. The Wellington passenger businesses, TranzMetro, increased passenger numbers in the half, and the Scenic passenger unit is showing signs of growth after a concerted marketing effort, KiwiRail said.
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