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Home / Business

Tranz Rail dips but rebound promised

30 Jun, 2000 03:24 AM2 mins to read

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By Yoke Har Lee

Tranz Rail Holdings reported a 38.8 per cent drop from a year ago in its half-year net profit to December, down to $13.14 million.

The fall came in an economic environment showing signs of bottoming, but analysts said margin pressures would dampen a strong rebound in the company's
bottomline.

Chief financial officer Ronald Russ said Tranz Rail should be able to achieve full-year profit of about $40 million expected by the market.

"Forestry volume is back with a vengeance but improvement in agriculture product was offset by the drought," Mr Russ said.

However, while there were indications of key product sectors, such as forestry, recovering, competitive pricing by coastal shipping and truck companies was still a key concern, the analysts said.

One analyst said, however, that while margins remained an issue, yields seemed to have held up well in the past three months.

The fall in six-month profit was due to lower revenues, a $1.7 million charge for redundancies and higher depreciation costs for the company's capital expenditures on projects, the company said.

Revenues came in at $281.49 million against $282.94 million the same period last year. Company equity accounted a $1.4 million profit from its investment in Australian Transport Network. Earnings per share for the half year was 11c against 17c.

The company said that while freight tonnage rose 7 per cent over the previous year, revenue per tonne kilometre was 2 per cent lower.

Forestry tonnage rose 16 per cent, and agricultural and food products rose 5 per cent. Coal tonnage was 19 per cent lower while fertilisers/minerals and aggregate tonnage was 18 per cent down.

Tranz Rail chairman Edward Burkhart said the innovative milk train services for Kiwi Cooperative Dairies helped boost agriculture and food product tonnage, despite the drought in parts of the country.

Analysts said key risks for Tranz Rail were how it managed its yields and whether it could continue cost reduction.

One analyst who had an "accumulate" recommendation for the stock said the call was based on the company's aggressive cost-cutting plan and revenue turnaround.

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