KiwiRail, the state-owned rail and freight operator, said its full year net loss widened while the operating surplus sank by almost a third due to the impact of the Kaikoura earthquake in November.
The Auckland-based company reported a net loss of $197.3 million in the year to June 30 versus a net loss of $194 million in the prior year. The loss reflected an impairment charge of $295.8 million on KiwiRail’s rail assets. As the rail network does not generate sufficient cash to cover the level of required investment, a large proportion of the accounting value must be written off each year, it said.
KiwiRail said its operating surplus, or earnings before depreciation and amortisation, interest, impairment, capital grants and fair value changes, was $52 million versus $85.5 million in the prior year as the earthquake and its aftermath sapped revenue by $40 million.
The 7.8 magnitude earthquake isolated the tourist town of Kaikoura and caused damage in the upper reaches of the South Island and lower part of the North Island, including severed rail lines.
“If the earthquake had not occurred, the operating surplus would have exceeded forecast, budget and the FY16 underlying result of $86 million,” chair Trevor Janes said. The company has a target of $80 million to $85 million and excluding the impact of the earthquake its underlying profit was $92 million.
The $40 million impact is made up predominantly of foregone domestic freight revenue as the Main North Line closed, plus some effect from falls in bulk freight such as steel and gas, said chief executive Peter Reidy. Passenger volumes on the Interislander also took a hit as tourists avoided road travel to Christchurch, and the Coastal Pacific tourism service was cancelled.
Operating revenues were down 14 percent on the year to $594.8 million. Operating expenses, meanwhile, were up 12 percent to $542.5 million. With the different business units, freight revenues fell 11 percent to $345.6 million, the Interislander ferries’ turnover was up 2 percent at $130.2 million and Tranz Metro suburban passenger train services fell 99.8 percent to $100,000 after France’s Transdev won the contract to operate Wellington’s commuter service. Revenue at the Scenic Journeys passenger trains fell 23 percent to $22.8 million.
Looking ahead, Reidy said tourism looks set to “rebound quickly” with an 8 percent rise in rail passenger journeys prior to November “giving confidence that this is sustainable growth that will continue once our Coastal Pacific returns next year.”