KiwiRail’s operating surplus for the 2017 financial year suffered a $40 million loss from the aftermath of the Kaikoura earthquake.
KiwiRail also absorbed a $9 million revenue impact of a fire which in February took out the South Island’s Midland Line for six weeks, cancelling its freight services and the TranzAlpine tourism journey.
The purchase of the Kaitaki ferry from Irish Ferries in May which reduces charter fees and secures the future of the Interislander service is also included in the result as well as $8m for a change of accounting treatment of drydock costs.
The FY17 result shows a $52 million surplus achieved.
“Had the earthquake had not occurred, the operating surplus would have exceeded forecast, budget and the FY16 underlying result of $86m,” says KiwiRail chairperson Trevor Janes.
“Before November’s event took out our major South Island services on the Main North Line (MNL), we were seeing the results of our efforts and anticipating a record season for our passenger and freight businesses,” he says.
“Operating margins were increasing due to significant productivity savings which in FY17 totalled $18 million, building on the $27 million achieved in 2016,” says Janes.
“One of the earthquake’s strange effects is that it has increased asset impairment. An accounting requirement of the organisation means writing off capital expenditure each year, which consequently values assets at substantially below replacement cost,” he says.
“This treatment has never been more anomalous than this year as we have written off all of the earthquake rebuild costs, despite it delivering significant value to NZ,” says Janes.
KiwiRail chief executive Peter Reidy says the $40 million impact is made up predominantly of domestic freight revenue loss as the MNL closed, plus some effect from falls in bulk freight such as steel and gas.
He says passenger volumes on the Interislander also took a hit as tourists avoided road travel to Christchurch and the cancellation of the Coastal Pacific tourism service.
“There have been revenue gains made in industries less affected by recent events such as forestry, which was a standout performer in the year, up 7%,” says Reidy.
“KiwiRail’s port partnerships saw volumes at Port of Tauranga rise by 12%, while we actively enabled the transfer of freight from the earthquake damaged CentrePort in Wellington to the ports of Napier and Auckland,” he says.
“Tourism looks set to rebound quickly with the 8% rise we were seeing in our rail passenger journeys before November giving confidence that this is sustainable growth that will continue once our Coastal Pacific returns next year,” says Reidy.
