KiwiRail, which runs the nation's railway network, is tracking ahead of expectations after the first three months of the financial year, but is still conscious of the need to keep a lid on costs.
The state-owned enterprise's group revenue was ahead of budget in the first-quarter on increases in forestry, import/export and domestic freight volumes, chief executive Jim Quinn told a public meeting in Wellington.
The rail operator had also reported increases in freight on the interisland ferries, and its passenger services were in line with expectations.
"The outlook for this financial year is promising as group revenue is slightly ahead of budget," chairman John Spencer said.
"We have to remain focused on cost containment and a better way of operating to ensure we meet our targets and drive as much of the revenue growth as possible to the bottom line."
Earlier this month KiwiRail mothballed the Napier-Gisborne line saying the cost of re-opening the track wasn't worth it.
The rail operator is on a drive to strip out $200 million in annual spending if it is to meet forecast earnings of $64.6 million by 2013.
The railway operator missed its statement of corporate intent revenue target of $737 million, as it posted annual sales of $71.58 million in the latest financial year.