Fuel bill to shunt Tranz Rail profit into red

By Ray Lilley

Friday 20th October 2000

OUT OF STEAM: Tranz Rail's costs could slow its growth

Tranz Rail's growth back to stronger profits could halt in its tracks next week, with first-quarter results likely to return to red ink because of burgeoning fuel costs.

Some analysts believe the company will have worked hard to return a small operating profit, before abnormal costs push its net profit down into the red.

After a profit warning early in the month, such an outcome is expected.

Last year's first-quarter $10 million operating profit (net profit $5.5 million) could be overshadowed by a doubling of the company's fuel bill for the first three months of this year.

The flat economy, traditional "slow" first-quarter for Tranz Rail, and restructuring costs will also have an impact.

In the three months to September 1999, fuel and electricity costs were $10.8 million.

Earlier the company confirmed that "fuel costs in the [September] quarter were double that of the comparable quarter the previous financial year." That would shunt the fuel bill figure to at least $18 million for the three months.

The company has been through at least four tranches of freight price rises totalling at least 12% in the past seven months as it tried to recoup some of the galloping costs of imported fuel. It has also capped its capital expenditure programme at $50 million a year. Its net profit for the 1999-2000 June year was $46.9 million, down sharply on the previous $70.2 million.

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