Toll NZ Limited Interim Report to Shareholders

Toll NZ Limited Interim Report to Shareholders

For the Six Months Ended 31 December 2006

Toll NZ today announced an operating profit from trading of $24.2 million for the six months to 31 December 2006 compared to $30.3 million for the six months ended 31 December 2005. No interim dividend will be paid.

This reduction in operating profit has been primarily driven by margin contraction in the Toll Rail and Interislander businesses. Underlying revenue after adjusting for the sale of Refrigerated business and the fuel surcharge, increased by $26 million to $366 million with continued strength across the business particularly in coal, domestic distribution, import/export and rail passenger.

Highlights for the period included:

- Continued investment and innovation in the coal route, culminating in the trial of seven locomotives hauling 45 coal wagons through the Otira Gorge. If all the trials are successful, this will assist in providing greater capacity and efficiency to the growth in coal and other bulk commodities.
- Completion of a long-term arrangement with the Greater Wellington Regional Council (GWRC) to provide passenger rail services for the Greater Wellington region. Toll looks forward to working with GWRC and further improving this service over the next 10 years and beyond.
- Toll Tranzlink continues to benefit from its technology led approach to domestic road carriage, and was able to win further contracts during the year through a combination of enhanced service and value-add technology.
- The Overlander was successfully re-launched with upgraded carriages and enhanced service contributing to strong passenger volumes since September. Toll would like to thank the public of New Zealand for its support for the revamped service.
- The successful launch of the Chris Cairns Foundation to provide support and funding for safer rail crossings across New Zealand. Toll is grateful for Chris’ support in this key safety initiative, and look forward to level crossing fatalities being reduced further beyond the current 40-year low.

In addition to these initiatives the company has continued to invest in its locomotive and rail wagon fleet with capital expenditure of $24 million representing a significant portion of the operating cash flows generated during the 6 month period. Due to this capital investment and likely increased commitments in the future, the company does not expect to be in a position to pay dividends in the foreseeable future.

While discussions with the Government and OnTrack have not yet been concluded, the company is confident that progress on a sustainable long term arrangement for Rail is being made with the parties working constructively to conclude this important plank for investment in New Zealand infrastructure in the very near future.

Looking forward, while the company’s performance has been behind the same period last year, the second half of the 2007 financial year has started well and the company remains confident of a stronger second half of the year.

Ends

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