KiwiRail, the state-owned railway company, missed its statement of corporate intent targets for full-year revenue and earnings because of weaker-than-expected returns from its passenger and Interislander units.

Operating revenue in the 12 months ended June 30 rose 7.2 per cent to $715.8 million, the Wellington-based company said in a statement.

The net operating surplus fell 24 per cent to $77.6 million, including an $11.8 million writedown of inventory and a $15.6 million restructuring charge against its infrastructure and engineering business, which is to shed 181 jobs over the next six months.

The net result was a loss of $2.3 billion, mainly reflecting a $2.2 billion impairment as part of the already-announced $9.3 billion reduction in the value of its assets.


Revenue lagged behind KiwiRail's SCI target of $737 million and earnings before interest, tax, depreciation and amortisation was $35 million below target.

"KiwiRail will continue its focus on reducing costs, lifting efficiency and better managing infrastructure spending so that the expected earnings are delivered," chairman John Spencer said. "No one will thank us if we can't make this company sustainable and making a real contribution to the country's economy."

Freight, KiwiRail's biggest source of sales, continued to be the bright spot, with revenue rising about 15 per cent to $457.6 million. The railway has won plaudits from companies including Port of Tauranga, which today posted a record annual profit and thanked KiwiRail for its work on the Auckland-Tauranga line.

Revenue from the Interislander rose 0.8 per cent to $123.9 million, less than expected, denting earnings from that business by $4.7 million, reflecting the ongoing impact from the Christchurch earthquakes and extra costs from delays in the work to increase the size of the Aratere ferry.

Trans Metro, which operates commuter services in Wellington and Auckland, reported a 30 per cent drop in revenue to $45.7 million, reflecting changes to funding arrangements that began in July last year. Trans Scenic revenue fell 5.5 per cent to $20.3 million as the quakes continued to dent passenger numbers.