KiwiRail’s half-year results have been released, revealing that the operator would have significantly improved its position without the heavy $25 million impact of the Kaikoura earthquake in November 2016, which severed damaged over 150 kilometres of the Main North Line.
In the six months up to December 2017, KiwiRail established an operating surplus of $15.3 million; however, the operator estimates that this would have been closer to $40 million – a 39% improvement on its 2016 result – had the Kaikoura earthquake not occurred.
KiwiRail crews spent over 10 months replacing damaged track, rebuilding bridges, repairing tunnels, and clearing the large slips along the route, a major freight link in the country’s supply network.
“It is a credit to the 3,400 people of KiwiRail that this result betters the December 2016 half year and that the organisation is on target to meet its commitment to Government for the third year running,” said Trevor Janes, KiwiRail’s chairman.
“The underlying operating surplus of $40 million is a significant improvement on the prior half-year result of $23 million.”
Excluding the impact of the earthquake, the operator saw 6% increase in bulk freight, with rises in Fonterra bulk milk and, following BT Mining’s purchase of Solid Energy last year, in coal volumes.
Janes indicated that the heavy rain in September and at the beginning of October, which delayed the opening of freight services on the Main North Line, along with issues arising from an ageing locomotive fleet – ranging between 32 years old to 57 years-old – created uncertainty for domestic customers and the limited overnight services.
“It has been a messy six months, particularly in the South Island, where weather disrupted the recovery we had worked hard to achieve by reopening the earthquake-affected Main North Line months ahead of schedule,” Janes said.
“While the previous Government committed to funding any insurance shortfall of the rail rebuild, KiwiRail has had to absorb the on-going revenue impact, including restricted freight volumes.”
Some highlights of KiwiRail’s half-year results include a 7% revenue and 4% patronage increase for its Interislander services, a 16% growth in revenue from intermodal ports, and an 8% increase in forestry revenue.
“We have been working closely with the industry to maximise our ability to meet the wall of wood now coming on stream, as the result of the large volume of trees planted in early 1990s,” KiwiRail chief executive Peter Reidy said.
“Our log wagon fleet has grown by 40% since 2011. We have some very clever thinkers on our team and have been able to do this in an innovative and cost-efficient way by converting wagons retired from our container fleet.”
Though KiwiRail is currently running trains on forestry routes as frequently as seven days a week, Reidy said it could be doing more.
“There are more than 130 additional log wagon conversions coming on stream over the next six months, which will allow us to meet further demand this year; and a further 200 wagon conversions are planned for the 2019 financial year,” he said.
KiwiRail has working with the industry to develop log hubs at key locations on the network – such as at Masterton, Whanganui and Palmerston North – to help move more logs to Napier Port and CentrePort by rail rather than road.
“Consolidating volumes and running to export ports by train is a cost-effective option for forestry owners/harvesters,” said Reidy.
“We bring benefits of economies of scale, particularly where forests are a long way from an export sea port. In addition, our trains mean fewer trucks on the road, and lower carbon emissions.”
The operator reports that it remains on track on track to meet the full year operating surplus commitment of $30-50 million over the next six months.