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KiwiRail boosts freight income

Tuesday 1st March 2011

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State-owned KiwiRail has seen a turnaround in freight income for the first six months of the financial year, although the company was pushed into a net deficit of $117.6 million by depreciation.

For the six months ended December 31, operating revenue was up 5% at $326.1 million on the same period a year earlier. Operating expenses rose just 0.3% to $282.7 million despite damage to the network from a number of causes, including last year's Canterbury earthquake.

Operating profit - before depreciation and grant income from the Government to fund the company's "Turnaround Plan" - was $43.3 million, up 66% on a year earlier.

Depreciation was $137.7 million, reflecting the underlying valuations of the company's assets, said chairman John Spencer.

The company was looking at whether a more realistic carrying value would be appropriate.

KiwiRail's turnaround plan, aimed at increasing freight revenue after years of static or declining freight volume, aims to strengthen the rail network and improve service.

For the period, bulk freight revenue was up almost 13%, import-export freight revenue rose 12% and domestic freight revenue was up almost 16%.

Bulk, domestic and import-export freight on the rail network and across Cook Strait on Interislander ferries generated more than 60% of revenue.

Other parts of the business improved on the previous year, aside from long-distance passenger services as a result of adverse trading conditions and service disruptions, he said.

KiwiRail's result reflected a slowing in overall economic growth, and business activity could weaken further in the second half of the financial year.

In the second half of the financial year, profitability was likely to be hit by a reduction in milk volumes due to dry weather, lower domestic freight volumes as a result of depressed retail trade, and the Aratere ferry being out of action for four months, Spencer said.

Coal and freight volumes would also be reduced after the latest quake to hit Christchurch.



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