State-owned KiwiRail reported a 7 percent improvement in operating earnings in the six month to Dec. 31, at $16.3 million, reflecting a 30 percent lift in the value of domestic freight carried on its network caused in large part by the reopening of the Christchurch to Picton rail link, which was destroyed by the 2016 Kaikoura earthquake.
Total revenue for the half year was up 12 percent at $328.8 million, compared with the same period a year earlier.
As is always the case with KiwiRail, the company reported a bottom line loss because the capital and depreciation costs on its network always outstrip what the rail network can earn.
For the half, that net loss came in at $104.6 million, a 45.8 percent improvement on the $193 million loss reported in the same half a year earlier.
The latest loss included “impairment of $137 million relating to KiwiRail’s rail assets”, according to a pro forma profit and loss statement released on request to BusinessDesk. “As the rail network does not generate sufficient cashflows to cover the level of required investment, a large portion of the accounting value must be written off each year.”
Both the previous and current government have accepted that the value of a national rail network outweighs its cost for a variety of public good reasons, including the role of rail in decarbonisation, reducing roading congestion and improving road safety, with the Labour-led coalition deciding to fund rail network improvements from the same budget as national roading infrastructure.
KiwiRail chair Greg Miller said in a statement that the organisation was “shaking off the impacts of the 2016 Kaikoura earthquake”.
“It will take some time to get back to where we were before the Main North Line was closed following the quake but we are seeing increased demand in this result.”
He appeared to warn that operating earnings would remain under pressure because of “increased cost pressures resulting from increased regulation, compliance and committing to future investments that will pay back in the long term”.
He pointed to a string of new investments, many funded from the coalition’s $3 billion Provincial Growth Fund, as evidence the current government saw KiwiRail as being in “catch-up mode” after “a legacy of under-investment from successive governments”.
The 2008-2017 National Party-led government also started to loosen the public purse-strings for KiwiRail, committing significant chunks of new capital for upgrades from the funds raised from partial privatisation of its electricity companies.
Developments currently in the pipeline include reopening the Wairoa-Napier line for log transport, preparing the case for extending the northern rail network to Marsden Point, in Northland, increased and higher quality tourism rail products, a trial commuter service between Auckland and Hamilton, and an order for two new, rail-enabled Cook Strait ferries.
The half year result showed revenues increased by 15 percent from forestry loads, 8 percent from bulk freight, and 8 percent from tourism services. Insurance proceeds of $26.1 million were booked during the half, compared with $6.8 million in the previous comparable half.