Freight up, forecast down at KiwiRail

Full-year earnings for state-owned railroad KiwiRail will come up short as rising freight volumes were offset by additional challenges the business has been facing.

The company’s full year target of $139 million is predicted to miss following “unsatisfactory” EBITDA results likely to forecast within the ranges of $105 million to $115 million.

Several challenges within other parts of the business contributing to the disappointing result forecast included passenger, Interislander and Workshops, mainly due to factors including the current economic conditions and the ongoing effects of the February earthquakes.

KiwiRail’s core rail-freight business experienced an 11% increase in revenue to an amount of over $220 million, which contributed to an overall increase in business revenue of over 5% for the half year with the top freight performer being the Import Export (IMEX) division, recording a volume increase of 16% and revenue increase of over 12% to over $61 million.

“The import-export volume growth of 16% reflects a lift in volumes from a range of customers, but in particular export dairy,” said KiwiRail chairman John Spencer.

“We expect the growth in this segment of the freight business to continue as we add more rolling stock capacity and customers.”

KiwiRail reported a rise in operating revenue of just under $17 million on its corresponding six months, with a result of $349 million compared to a previous $332 million in 2010, a change of 5.1%

However, the operating profit before depreciation and grant income of $43.6 million was almost $6 million lower than during the previous period.

Mr Spencer said that while the continuing freight growth is encouraging, the performance within other parts of the business will need to be monitored closely.

“We have to implement tighter cost controls, particularly in those parts of the business being impacted by ongoing issues such as the soft economy and the fall in South Island tourism.”

A final decision will be made by the company regarding the review on minor lines and focusing on addressing the future viability of the Workshops business by “reducing costs and improving productivity.”