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Tranz Rail on Track with Second Quarter Result

MEDIA RELEASE

29 January 2003

Tranz Rail on Track with Second Quarter Result

Tranz Rail Holdings Limited today announced an operating profit from trading of $18.4 million for the three months to 31 December 2002. The operating profit, although slightly behind the original forecast of $19.4 million for the quarter, is consistent with the revised forecast included in the Prospectus for the Rights issue.

The Group result was affected by costs associated with the bank’s refinancing, offset by a $5.6 million unrealised foreign exchange gain on the Aratere finance lease. As part of the new banking facilities, Tranz Rail was required to terminate the hedge that was in place.

Managing director Michael Beard said that much of the Company’s attention during the past quarter has been focused on the successful completion of the Rights issue, the finalisation of negotiations surrounding the Aratere lease and the re-negotiation of the Company’s banking facilities through to June 2004.

Total revenue for the second quarter was $164.5 million, with forestry again the standout performer, $1.7 million ahead of forecast on the back of stronger export demand for logs. Domestic freight has also been strong with an increase in volumes, previously transported on road, following improvements to the rail service reliability.

While operating costs of $146.1 million were slightly higher than those forecast, this largely reflects increased costs caused by a derailment at Rukuhia just prior to Christmas.

“Overall these results are pleasing. Our operating revenue of $302 million for the first six-months is an increase of 4.5% over the operating revenue of $289 million for the same period last year. This improvement is also demonstrated by a $17 million improvement in net cash flows from operations. Tranz Rail’s operating performance is now showing the benefits following a period of restructuring and significant change in the previous two years,” Mr Beard said.

“Having resolved issues around the Company’s financing, the way is now clear for the Company to focus on the important operational issues necessary to meet our targets for the 2003 financial year and beyond.”

Mr Beard said that achieving Tranz Rail’s forecast results will not, however, be without its challenges. There are still important platforms of the Strategic Plan to be completed:

- sale of Wellington Metro;
- finalisation of lease negotiations with New Zealand Railways Corporation;
- negotiations with the Crown on Tranz Rail’s place in the Government’s Land Transport Policy;
- analysis of Clifford Bay; and
- sale of surplus assets.

“On the operational side, control of costs, mitigating the effects of competition, and maintaining service integrity will be the key focus to producing satisfactory operating profits in line with forecasts,” he said.

ENDS

Tranz Rail Holdings Limited

Interim Statement of Financial Performance

Quarter ended 31 December 2002 (unaudited)

(Note: Amounts disclosed in the column headed “Forecast” relate to the forecast included in the market presentation on 23 July 2002)

Actual

$m Forecast

$m Variance

$m Variance

%

Revenue:

Freight revenue:

„« Bulk (1) 34.5 34.3 0.2 0.6

„« Intermodal (2) 72.7 73.6 (0.9) (1.2)

„« Other 13.1 13.1 - -

120.3 121.0 (0.7) (0.6)

Passenger revenue 35.6 36.1 (0.5) (1.4)

Other revenue 8.6 6.9 1.7 24.6

Total revenue 164.5 164.0 0.5 0.3

Operating costs:

Labour and related costs 42.4 41.0 (1.4) (3.4)

Purchased services 26.5 26.4 (0.1) (0.4)

Lease and rental costs 17.6 18.4 0.8 4.3

Contractor costs 16.7 16.2 (0.5) (3.1)

Fuel and traction electricity 13.0 13.7 0.7 5.1

Depreciation 12.5 13.1 0.6 4.6

Casualties and insurance 4.4 2.2 (2.2) (100.0)

Materials and supplies 3.7 3.5 (0.2) (5.7)

Other expenses 9.3 10.1 0.8 7.9

Total operating costs 146.1 144.6 (1.5) (1.0)

OPERATING PROFIT FROM TRADING

18.4

19.4

(1.0)

(5.2)

Asset Sales - 5.0 (5.0) (100.0)

Aratere FX Gain 5.6 - 5.6 100.0

Equity accounted earnings of associates

0.2

0.2

-

-

Net interest expense and financing cost charges

(8.1)

(5.9)

(2.2)

(37.3)

Net profit before taxation 16.1 18.7 (2.6) (13.9)

Taxation expense - - - -

Net profit after tax 16.1 18.7 (2.6) (13.9)

(1) Bulk revenue comprises:

„« Forestry 12.0 10.3 1.7 16.5

„« Coal 9.9 10.7 (0.8) (7.5)

„« Milk 5.4 6.0 (0.6) (10.0)

„« Other 7.2 7.3 (0.1) (1.4)

Total Bulk revenue 34.5 34.3 0.2 0.6

Actual

$m Forecast

$m Variance

$m Variance

%

(2) Intermodal revenue comprises:

„« Kombi 43.8 44.5 (0.7) (1.6)

„« Imex 28.9 29.1 (0.2) (0.7)

Total Intermodal revenue 72.7 73.6 (0.9) (1.2)

Rail Services Group

Quarter ended 31 December 2002 (unaudited)

Actual

$m Forecast

$m Variance

$m Variance

%

Revenue:

Freight revenue 81.8 82.3 (0.5) (0.6)

Miscellaneous revenue 8.8 7.3 1.5 20.5

Total revenue 90.6 89.6 1.0 1.1

Terminals 12.6 10.5 (2.1) (20.0)

Customer service and commercial

2.9

2.3

(0.6)

(26.1)

Locomotives 11.7 10.5 (1.2) (11.4)

Wagons 5.1 4.7 (0.4) (8.5)

Rolling stock lease 4.6 5.4 0.8 14.8

Infrastructure and engineering

12.5

12.7

0.2

1.6

Fuel 7.2 7.1 (0.1) (1.4)

Manufacturing 1.9 2.2 0.3 13.6

Other linehaul 11.0 10.2 (0.8) (7.8)

Other costs 3.6 4.7 1.1 23.4

Total costs excluding depreciation

73.1

70.3

(2.8)

(4.0)

EBITDA 17.5 19.3 (1.8) (9.3)

Depreciation 9.4 10.3 0.9 (8.7)

EBIT 8.1 9.0 (0.9) (10.0)

Distribution Services Group

Quarter ended 31 December 2002 (unaudited)

Actual

$m Forecast

$m Variance

$m Variance

%

Revenue:

External revenue 39.5 41.6 (2.1) (5.0)

Internal revenue 4.5 3.8 0.7 18.4

Total revenue 44.0 45.4 (1.4) (3.1)

Linehaul and transport costs

26.8

27.6

0.8

2.9

Branch costs 13.8 13.1 (0.7) (5.3)

Indirect costs 1.6 2.4 0.8 33.3

Total costs excluding depreciation

42.2

43.1

0.9

2.1

EBITDA 1.8 2.3 (0.5) (21.7)

Depreciation 0.8 0.6 (0.2) (33.3)

EBIT 1.0 1.7 (0.7) (41.1)

The Interisland Line

Quarter ended 31 December 2002 (unaudited)

Actual

$m Forecast

$m Variance

$m Variance

%

Revenue:

External revenue 32.3 32.4 (0.1) (0.3)

Internal revenue 6.9 6.8 0.1 1.5

Total revenue 39.2 39.2 - -

Labour costs 8.7 8.1 (0.6) (7.4)

Fuel 4.3 4.7 0.4 8.5

Charter costs 4.9 4.7 (0.2) (4.3)

Port costs 1.9 2.6 0.7 26.9

Other costs 8.8 8.5 (0.3) (3.5)

Total costs excluding depreciation

28.6

28.6

-

-

EBITDA 10.6 10.6 - -

Depreciation 1.6 1.6 - -

EBIT 9.0 9.0 - -

Tranz Rail Holdings Limited

Notional Adjustment for Rolling Stock Lease

Quarter ended 31 December 2002 (unaudited)

Actual

$m

Reported operating profit from trading 18.4

Notional adjustment for rolling stock lease:

„« Decrease in lease cost 4.7

„« Unrealised foreign exchange gain/(loss) 11.2

„« Increase in depreciation (1.5)

32.8

Tranz Rail Holdings Limited

Interim Statement of Financial Performance

Six months ended 31 December 2002 (unaudited)

(Note: Amounts disclosed in the column headed “Forecast” relate to the forecast included in the market presentation on 23 July 2002)

Actual

$m Forecast

$m Variance

$m Variance

%

Revenue:

Freight revenue:

„« Bulk (1) 66.7 65.1 1.6 2.5

„« Intermodal (2) 132.7 137.2 (4.5) (3.3)

„« Other 26.7 26.1 0.6 2.3

226.1 228.4 (2.3) (1.0)

Passenger revenue 60.8 60.2 0.6 1.0

Other revenue 15.4 13.2 2.2 16.7

Total revenue 302.3 301.8 0.5 0.2

Operating costs:

Labour and related costs 83.7 83.8 0.1 0.1

Purchased services 55.3 53.6 (1.7) (3.2)

Lease and rental costs 35.9 36.7 0.8 2.2

Contractor costs 32.0 31.2 (0.8) (2.6)

Fuel and traction electricity 25.5 27.6 2.1 7.6

Depreciation 24.8 25.9 1.1 4.3

Casualties and insurance 8.0 4.5 (3.5) (77.8)

Materials and supplies 6.8 6.7 (0.1) (1.5)

Other expenses 19.1 19.7 0.6 3.0

Total operating costs 291.1 289.7 (1.4) (0.5)

OPERATING PROFIT FROM TRADING

11.2

12.1

(0.9)

(7.4)

Asset Sales - 5.0 (5.0) (100.0)

Aratere FX Gain 5.6 - 5.6 100.0

Equity accounted earnings of associates

-

0.2

(0.2)

(100.0)

Net interest expense and financing cost charges

(14.9)

(11.9)

(3.0)

(25.2)

Net profit before taxation 1.9 5.4 (3.5) (64.8)

Taxation expense - - - -

Net profit after tax 1.9 5.4 (3.5) (64.8)

(1) Bulk revenue comprises:

„« Forestry 24.8 20.6 4.2 20.4

„« Coal 20.1 21.3 (1.2) (5.6)

„« Milk 8.1 8.6 (0.5) (5.8)

„« Other 13.7 14.6 (0.9) (6.2)

Total Bulk revenue 66.7 65.1 1.6 2.5

Actual

$m Forecast

$m Variance

$m Variance

%

(2) Intermodal revenue comprises:

„« Kombi 81.6 82.5 (0.9) (1.1)

„« Imex 51.1 54.7 (3.6) (6.6)

Total Intermodal revenue 132.7 137.2 (4.5) (3.3)

Rail Services Group

Six months ended 31 December 2002 (unaudited)

Actual

$m Forecast

$m Variance

$m Variance

%

Revenue:

Freight revenue 152.5 154.0 (1.5) (1.0)

Miscellaneous revenue 15.9 14.1 1.8 12.8

Total revenue 168.4 168.1 0.3 0.2

Terminals 24.0 21.3 (2.7) (12.7)

Customer service and commercial

6.5

5.2

(1.3)

(25.0)

Locomotives 22.6 21.2 (1.4) (6.6)

Wagons 9.8 9.4 (0.4) (4.3)

Rolling stock lease 10.4 10.8 0.4 3.7

Infrastructure and engineering

26.8

25.4

(1.4)

(5.5)

Fuel 14.4 15.4 1.0 6.5

Manufacturing 3.7 4.4 0.7 15.9

Other linehaul 21.9 20.7 (1.2) (5.8)

Other costs 7.9 9.6 1.7 17.7

Total costs excluding depreciation

148.0

143.4

(4.6)

(3.2)

EBITDA 20.4 24.7 (4.3) (17.4)

Depreciation 18.8 20.4 1.6 7.8

EBIT 1.6 4.3 (2.7) (62.8)

Distribution Services Group

Six months ended 31 December 2002 (unaudited)

Actual

$m Forecast

$m Variance

$m Variance

%

Revenue:

External revenue 75.4 79.1 (3.7) (4.7)

Internal revenue 8.8 7.7 1.1 14.3

Total revenue 84.2 86.8 (2.6) (3.0)

Linehaul and transport costs

52.6

53.5

0.9

1.7

Branch costs 26.3 26.1 (0.2) (0.8)

Indirect costs 3.1 4.7 1.6 34.0

Total costs excluding depreciation

82.0

84.3

2.3

2.7

EBITDA 2.2 2.5 (0.3) (12.0)

Depreciation 1.8 1.4 (0.4) (28.6)

EBIT 0.4 1.1 (0.7) (63.6)

The Interisland Line

Six months ended 31 December 2002 (unaudited)

Actual

$m Forecast

$m Variance

$m Variance

%

Revenue:

External revenue 54.4 52.9 1.5 2.8

Internal revenue 13.8 13.6 0.2 1.5

Total revenue 68.2 66.5 1.7 2.6

Labour costs 16.5 16.0 (0.5) (3.1)

Fuel 7.9 8.6 0.7 8.1

Charter costs 9.4 9.4 - -

Port costs 4.5 5.2 0.7 13.5

Other costs 17.0 16.3 (0.7) (4.3)

Total costs excluding depreciation

55.3

55.5

0.2

0.4

EBITDA 12.9 11.0 1.9 17.3

Depreciation 3.1 3.2 0.1 3.1

EBIT 9.8 7.8 2.0 25.6

Tranz Rail Holdings Limited

Notional Adjustment for Rolling Stock Lease

Six months ended 31 December 2002 (unaudited)

Actual

$m

Reported operating profit from trading 11.2

Notional adjustment for rolling stock lease:

„« Decrease in lease cost 10.5

„« Unrealised foreign exchange gain 7.2

„« Increase in depreciation (3.0)

25.9

Shares of Tranz Rail Holdings Limited are publicly traded on the New Zealand Stock Exchange under the symbol TRH. The Company’s listing on the NASDAQ National Market System under the symbol TNZR was terminated on 31 July 2002. The Company operates the only commercial railroad in New Zealand, offering an integrated network of rail, road, air and sea distribution and logistics management services that provides customers with transport solutions in the Australasian market place and passenger transport in New Zealand. Freight and passenger services utilise 3,900 route kilometres (2,400 route miles) of track, approximately 145 mainline locomotives, 4,300 wagons (freight cars), 15 carriages (passenger railcars), 162 self propelled passenger railcars, 2,750 shipping containers, two roll-on roll-off ferries and one fast ferry between the North and South Islands. The Company holds a 50% equity interest in Tranz Scenic 2001 Limited which operates long distance rail passenger services in New Zealand utilising approximately 24 locomotives, 92 carriages (passenger railcars) and 6 self propelled passenger railcars. The Company also holds a 27% equity interest in Australian Transport Network Limited which operates in Victoria and New South Wales and provides freight services in Tasmania, Australia, utilising 891 route kilometres (555 route miles) of track, approximately 50 locomotives and 700 wagons (freight cars). (http://www.tranzrail.co.nz)


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