Tranz Rail takes hit on track write-offs

By PAUL PANCKHURST

Tranz Rail's big clean-out yesterday saw the company drop the value of the country's rail track from its books and report a bottom line loss of $346 million.

"If it moved, they wrote it off," said one sharebroker.

The result came as Tranz Rail's 84 per cent owner, Australia's Toll Holdings, said it was on track for an eighth straight record annual profit.

The clear out at Tranz Rail in the results for the six months to December 31 included the one-off loss of $322 million on the soon-to-be-completed sale of the track to the Crown for $1.

The company also booked a $56 million one-off loss for costs including takeover advice, employee severance, asset write-offs, and provision for making good on leased assets.

The picture was brighter at the level of operating earnings - $11.8 million compared with $11.2 million in the year-ago period - but earnings for the full year will be hit by flood costs.

The company yesterday estimated the disruption and repairs from this month's storms were a $6 million to $8 million setback.

Toll managing director Paul Little said at least half of the cost would be repairs to the track. He confirmed that money might - "possibly" - have been saved if Toll had already handed the track to the Crown.

As well as the write-downs, earnings were affect by a change in accounting to align Tranz Rail with Toll. The altered approach to doubtful debt provisioning and employment entitlement liabilities boosted operating costs by $5.6 million.

In a conference call, Little said the rail and road company's focus was integrated service.

"For the first time in a long time, we will be taking a genuine interest in what the customer wants, not telling them what they can have."

Asked about securing 100 per cent control of Tranz Rail, Little said: "In a perfect world, we would rather have 100 per cent, but we're certainly not becoming obsessed about the need to acquire the balance."

Of Toll's minority stake in Owens Group, Little said: "That particular stake I think will present opportunities for us going forward as we talk to the other major shareholder, Mainfreight, about some orderly dissection there."

Tranz Rail said negotiations were underway for the sale of its 27 per cent stake in a Tasmanian rail business to Pacific National, which is jointly owned by Toll Holdings and Patrick Corporation.

Overall, Tranz Rail said its underlying trading and performance were "generally in line with expectations".

The company's Interisland shipping operations earned revenue of $50.3 million, compared with $54.4 million for the year-ago period. Land-based operations - rail and road - hauled in revenue of $259.2 million, with an operating loss of $200,000.