Fourth Quarter and Full Year Result

Fourth Quarter and Full Year Result for the Period Ended 30 June 2003

Auckland, New Zealand -Tranz Rail Holdings Limited [NZSX: TRH]

Tranz Rail today announced a $14.8 million (59%) increase in the Company’s end of year operating profit from trading compared to 2002. The final end of year operating profit from trading of $40.0 million is in line with the forecast released to the market on 16 June 2003, and in excess of the operating profit from trading of $25.2 million achieved in the 2002 financial year.

The Company recorded a net loss after tax of $2.6 million, compared to the prior year net loss after tax of $122.7 million. This is lower than what was put to the market in mid June and is as a result of the company taking a conservative view of its tax position during the year end and audit process. The impact is a $32.7 million non-cash tax expense, relating to an impairment of certain tax losses.

Managing Director Michael Beard said that the trading results showed the pleasing progress Tranz Rail has made over the past year, especially in terms of operational gains. While we did not achieve our original forecasts it is however important to acknowledge the increased operating profit we have achieved for 2003.

The Company achieved three major financial restructuring objectives over the past year: the negotiation of new bank facilities through to June 2004, the renegotiations of the terms of the lease on the Aratere ferry which resulted in multi-million dollar foreign exchange gains, and a capital raising of $65.2 million by a 5 for 7 rights issue of new shares at 75 cents each.

“Operational gains recorded during the year saw Tranz Rail move a record tonnage. Total bulk revenue was 2.1% ahead of the previous year, despite the effect of the drought conditions on the dairy season that affected milk volumes, and the strike at the Kinleith mill that affected forestry traffic. This increase was mainly due to coal revenue, which was 16.1% ahead of the prior year despite service issues relating to the Otira tunnel, which have now been resolved.

“Continued efficiencies within the Rail Services Group resulted in Intermodal traffic revenue being 4.1% above the prior year, mainly due to Kombi/Domestic traffic, which showed an increase in revenue of 5.8% on the 2002 result.

“Overall the freight rate decline has been arrested, efficiency has been enhanced and profitability continues to improve. Our capital expenditure is under tight control. We have exited loss-making areas of business and still have valuable surplus assets that can be realised in addition to winning valuable new business.

“Current operating trading and cash flows are coming in ahead of budget. The company has sufficient cash facilities to cover seasonal lows in the first quarter of the 2004 financial year” said Mr Beard.

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