Tranz Rail puts positive spin on interim figures

By CHRIS DANIELS

Tranz Rail says its predictions of a turnaround in performance are slowly becoming reality, as shown by its latest release of financial results.

The headline numbers are less optimistic.

Unaudited figures for the six months to December 31 show a net profit after tax of $1.9 million, down from $23 million for the same period the previous year. Tranz Rail's share price fell 5c after the results, ending the day at $1.31.

Although the value of its shares has fallen by nearly three-quarters in the past year, one analyst said yesterday's reduction should not be seen necessarily as an indictment of the second-quarter results, given recent increases in the company's share price.

Tranz Rail chief executive Michael Beard said the results were slightly behind the company's own projections - its $16.1 million net profit for its second quarter was down nearly 14 per cent on its own forecast of $18.7 million - but overall they were pleasing.

He said it showed "year on year, equivalent quarter growth in the top line". This was "the first time in this company's history that this set of circumstances have come together".

"This quarter is particularly pleasing for us and is in a sense we believe the beginning of the trend of the company coming in line with the forecast."

The interim result was buoyed by an unrealised foreign exchange gain of $5.6 million. Before unusual items, Tranz Rail's loss widened from $755,000 to $3.8 million.

Revenue for the six months of $302.3 million was down 17.6 per cent on the previous corresponding period.

Total revenue for the second quarter was $164.5 million, with the forestry sector providing $1.7 million more than expected.

Bulk tonnage of freight carried by the company was up nearly 6 per cent on the previous year. Its distribution services group recorded its first-ever operating profit, said Beard.

He said the latest quarter and the current quarter were always going to be "indicators of the traction of our change programme".

The recent capital restructuring of the company, completed just before Christmas, took away "the huge uncertainty that overhung the company in regards to its financial stability", said Beard.

With a stable platform from which to operate, Tranz Rail was now able to focus properly on its actual operating performance.

Beard gave updates on several of the main challenges facing the company. These included the sale of the Wellington Metro service, analysis of a possible move to a new Cook Strait ferry terminal in Clifford Bay and negotiations with the Government about its Land Transport Policy.

Tranz Rail was still looking for a buyer for its Wellington business, he said, after last year's breakdown of talks with the Wellington Regional Council and Stagecoach.

Commenting on reports that the Government had made an offer to buy back all of New Zealand's rail tracks from Tranz Rail, Beard said this was not the case.

Six options had been developed before last year's election relating to the place of rail in the Government's overall land transport strategy, he said. Discussions were expected to resume again in a month.

These options ranged from a "selective support of operations in a particular area or region of the country" right through to full Government purchase of the track.

It should be remembered that the track had been sold on an exclusive basis.

Tranz Rail did not need Government money to survive, said Beard, but could not expand the rail network by itself.

"Our operation stands on its own right, we don't need to be rescued."

Chief financial officer Wayne Collins said this week that Tranz Rail was expecting to appoint ABN Amro to advise it on shifting its South Island ferry terminal to Clifford Bay in Marlborough.