KiwiRail Annual Results 2014 Information
KIWIRAIL 2014 ANNUAL RESULTS BRIEFING
Friday 29 August 2014
EMBARGOED UNTIL 12PM – FRIDAY 29 AUGUST 2014
• 2014 was a challenging year for KiwiRail. Leading into it, the company had had steady growth in the three years prior.
• The operating surplus reached $108M in 2013 and on the back of that, solid growth was budgeted for the 2014 financial year.
• There were then two unexpected and high profile events.
• The first was the loss of a propeller on the Aratere.
• The second was asbestos contamination in our new freight locomotives.
• This was frustrating as the 2014 year had started off well: the freight business was set to exceed its revenue and profit targets for the year.
• On 5 November 2013 the Aratere lost her starboard propeller. Within 8 weeks the Stena Alegra was secured as a replacement. However, it did not have Aratere’s rail capacity.
• Aratere has been and continues to be critical to New Zealand’s freight movement. She provides 45% of our Cook Strait capacity, and provides an interisland service at critical times of the day for freight customers.
• In the third quarter asbestos containing materials were found in 40 new DL Freight locomotives. They had to be taken out of service to have the asbestos carefully removed.
• The temporary loss of 20% of KiwiRail’s locomotive fleet put added strain on the freight business in the second half of the financial year.
• Finally, there was a slowdown in export logging and dairy volumes from April to June this year as the prices for those goods fell on international markets. The company’s bulk, dairy and import / export customers make up 40% of revenue, so any movement there impacts on the bottom line.
• As a result of all these factors, the operating surplus in 2014 fell over 28% from 2013 to $77.5M. 2014 was extremely frustrating for KiwiRail, our customers and our stakeholders. However the company is determined to recover and continue its growth programme.
• While the financial side of the business is very important, KiwiRail has also been intensifying and refreshing its focus on safety. There has been a 45% year on year drop in total injuries but there is a long way to go to be best in class.
• KiwiRail is cautious about the outlook for 2015. While the economy is solid in some sectors, it’s patchy in the core commodity sectors that make up 40% of the company’s revenue.