By BRIAN GAYNOR
Michael Beard and his Tranz Rail executive team deserve a big bouquet for their frank and full disclosure at yesterday's presentation.
The company outlined detailed quarter-by-quarter forecasts for the June 2003 year and full projections for the 2004 and 2005 years.
The forecasts will place tremendous pressure on the management
because they will now be judged against figures compiled by them on a bottom-up basis.
But it is not all good news for shareholders. Tranz Rail will report a loss of about $200 million for the year to June, including abnormal items of $40.3 million and asset write-offs in the $148-170 million range.
For the 2003 year, Tranz Rail is predicting net earnings of $29.8 million. This gives the company a prospective 2003 price/earnings ratio of 9.2 based on yesterday's closing price of $2.20.
The optimistic forecast is based on the Rail Services Group achieving 5.5 per cent volume growth. The company says half of this is already assured by higher coal volumes on the West Coast to Lyttelton run.
Based on the 2004 net earning forecast of $53.4 million, the group is on a prospective 2004 price/earnings ratio of 5. Still, many shareholders will adopt a wait-and-see attitude because Tranz Rail has not delivered on previous forecasts.
Concerns over accounting were partly addressed by changing treatment of the two major lease and buyback arrangements, but track repairs will still be capitalised.
Beard said the tracks had a book value of over $200 million and a replacement cost of $4.6 billion. This meant Tranz Rail had a huge role in the transport sector and its future would be more assured if Beard's team achieved profit projections.
