Freight Rail, Passenger Rail

KiwiRail result belies tough trading conditions

The coronavirus pandemic failed to dent progress with the New Zealand rail operator

KiwiRail has managed to return a positive half-year financial result despite revenue declines in most freight sectors and the devastating impact that New Zealand’s closed borders have had on the company’s tourism businesses.

KiwiRail Holdings Limited, which owns and operates New Zealand’s rail network, this week announced an operating surplus of NZ$28.6 million for the six months ended 31 December, 2020 (HY21), which is $1.7m ahead of the same period last year.

KiwiRail Group chief executive Greg Miller says HY21 was challenging across the business with the positive result having been achieved by the company having a clear focus network-wide on strict cost control, and by negotiating more favourable commercial contracts when the opportunity arose, aligning capital to services and extracting better utilisation through integration of its service offering.

“Unsurprisingly, with New Zealand’s border closed to international visitors, our biggest operational loss in the six months to the end of December was in our Scenic business. Our Scenic trainsTranzAlpine, Coastal Pacific and Northern Explorer together recorded a 65 per cent fall in revenue (down $7.6m) compared with HY20.”

Miller said good business decisions at all levels had enabled the company to post a positive result, despite the difficult backdrop.

“During the lockdown early last year, we took the opportunity to reconfigure our train plan which is the immensely complex heart of any railway company. We made changes so that when business picked up again our operations could be delivered at a lower cost. These efficiencies contributed to a better result than we otherwise could have expected in the current environment.

“In the first quarter of FY21 – which included the second lockdown – we ran fewer trains but in the second quarter with freight congestion building on the back of international supply chain disruption, numbers increased. Overall, in the half year to 31 December we ran 8 per cent fewer trains, although some were longer and fuller because of the new train plan,” he said.

“Excluding the impact of fuel cost recoveries, overall revenue for HY21 was $4.8m ahead of the prior year, although the revenue mix has changed due to the impact of Covid.

“Interislander performed strongly despite the closed border, with higher than expected revenue from commercial vehicles (up 6 per cent or $1.7m) partially offsetting a fall of $2.2m (-7 per cent) from lower passenger numbers.”

Miller said KiwiRail was positioned well as consumers and businesses were increasingly interested in making lower-carbon choices for transport.  “Carrying freight by rail produces 70 per cent fewer greenhouse gas emissions than carrying the equivalent freight by road, as well as reducing congestion on the roads,” he said.

“We anticipate trading conditions to remain challenging for the remainder of FY21, though we will remain focussed on delivering capital projects and service delivery which are helping build a more resilient and flexible rail network for our customers and for New Zealand, and which will help improve our returns in the longer term.”

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