KiwiRail continues to build a stronger foundation for future

28th October, 2011

KiwiRail continues to build a stronger foundation for the future

KiwiRail is well on its way to a sustainable future, Chairman John Spencer said today at KiwiRail's Annual Public Meeting.

"In a year in which we, and the country, have had to meet momentous challenges, we have delivered an operating surplus increase of almost 29%, and an increase in operating revenue to $667 million."

"While this result was below our target, in the context of these challenges it was a positive result and an improvement on the previous year."

This was also the first year KiwiRail has not required an operating grant from Government, which in the previous year had been $90 million.

"The performance of the freight business during this time was particularly encouraging with an increase in revenue of eight per cent to almost $400 million, which is approximately 60 per cent of the company's overall revenue," said Mr Spencer.

During the 2010/2011 financial year KiwiRail and the NZ Government spent nearly $1.25 billion on major infrastructure improvement projects, suppliers, contractors and wages, of which over $1 billion was spent and sourced in New Zealand.

"This year new rolling stock arrived, we completed some major network improvements and extended the Aratere, to increase freight and passenger capacity," said Mr Spencer.

"The arrival of 20 new locomotives, 535 wagons and increasing the capacity and reliability of the network ensures that our business can continue to grow and improve for our customers."

"We have had to make tough purchasing decisions, but we have a finite amount to spend in many areas to get this business functioning efficiently and safely.

"We will continue making these hard calls to ensure our assets provide value for money and we deliver the sustainable railway that our customers need."

During this year KiwiRail has also been conducting a review of the company's asset valuation system and structure.

"While this process is still a proposal while we work through the technical details it is clear that the current valuation of $13 billion for our assets based on a replacement cost is not an appropriate valuation for the business," said Mr Spencer.

"We have recommended to our shareholder that we change the company entity structure and value our assets according to their productive earning value.

"This will mean an asset value write-down of approximately six billion dollars and will create a balance sheet more appropriate for our business as we continue to deliver on our plan."

According to Chief Executive, Jim Quinn, it is really in the last year there has been real and tangible progress and the business is starting to see the benefits.

"We are getting more customers, we are increasing the amount of freight moved, we are improving our on time performance and reliability, and we are getting better equipment," he said.

"All this work adds up to building a better business and being a major contributor to improving New Zealand's transport and supply chain infrastructure."

"The outlook for this financial year is promising as we head into our busiest season for the freight business.

"At this stage our operating revenue result is on budget and we are reasonably confident of achieving our target of $737 million if normal operating conditions continue," said Mr Quinn.

Continuous disclosure
KiwiRail's financial results for the twelve months ended 30 June 2011 have been released in accordance with the company's continuous disclosure policy - consistent with the Government's Continuous
Disclosure Rules for State Owned Enterprises which came into effect from 1 January 2010.

KiwiRail's full year accounts were tabled in Parliament on 11th October, 2011.

ENDS

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