KiwiRail has posted a full year operating surplus of $105.6 million for its above rail services business, down 33% on the previous year with the state-owned enterprise pointing to deteriorating global and domestic freight markets and escalating costs.
The national rail provider says the FY24 result reflects a “challenging year” with tough trading conditions and ongoing network outages from weather events.
It posted a net deficit after taxation of $646.9m for the 12 months to June 30 compared to a $770.8m deficit for the same period last year.
The result also reflects one-off major impacts of $25.9m. Without these one-off impacts, operating surplus would have been $131.5m.
Acting chair Rob Jager says KiwiRail recorded good growth in forestry revenues (up 11%), Interislander passenger (up 15%) and Great Journeys New Zealand services (up 41%). However, while bulk freight held steady, there were falls in import/export and domestic freight (down 11% and 6% respectively) in line with the New Zealand trading environment.
Jager says the reduction in domestic and import/export freight was disappointing but not unexpected with declining volumes across New Zealand impacting both road and rail operators.
“KiwiRail was able and willing to move more freight due to our improved asset availability but, too often, it was not there to carry in a year in which consumer confidence fell and New Zealand’s imports shrank.”
Extreme weather events which closed rail lines in Hawkes Bay and Northland continued to impact customers in FY24.
The below rail (network infrastructure) EBITDA was neutral, in line with the previous year.
The company is placing itself to be in a strong position to harness the economic recovery when it comes, Jager says.
“We have set ourselves an ambitious plan to grow by winning customer loyalty through enhanced customer experiences, better asset availability, improved service reliability and by delivering a lower cost of operations so we can compete for customers in freight and passenger markets.”
KiwiRail is committed to transforming itself to reach financial sustainability in its services business, and being able to fund its own “above rail” capital expenditure, Jager adds.
Chief executive Peter Reidy says the rail operator has been listening to customer feedback.
“We know that we need to continue to work hard at being easier to do business with, improve our service performance and reliability and deliver our service with competitive pricing.
“I’m confident that by engaging with our union partners, unleashing the talent of our people, and focussing on our plan, we will achieve these goals,” Reidy says.
FY24 saw $1.5 billion of capital expenditure across the organisation, a record investment in capital programmes and upgrades renewals across the 3700km rail network.
Reidy says KiwiRail is putting a lot of work into preparing Auckland for the start of the City Rail Link, building a network that will support faster, more frequent and more reliable trains for passengers, and greater capacity for freight trains.
In January, it completed the rebuild of the Eastern line following its full closure for nine months, and it is now one of the best performing parts of the metro network.
“Auckland requires continued intense effort and, unfortunately, that will mean disruption for commuters. However, the rewards will be a true metro system, efficiently carrying hundreds of thousands of people on low carbon trips across the city once CRL opens,” he says.
The investment in infrastructure is beginning to deliver results for its customers, he adds. Completed work on the metro networks in Wellington and Auckland is showing up in improved reliability.
“In Auckland, where we have been partnering closely with Auckland Transport and Auckland One Rail, 97.3% of services were delivered without network issues, and in Wellington it was an even better result – 99.5 per cent.
“On time performance for our premier freight services is at 89%, up from 83%. Availability of both locomotives and wagons is at 90%.
“The Interislander has also lifted its on-time performance and reliability, reflecting the benefits of our enhanced maintenance regime for the ferries.”
A recent assessment by independent international marine experts Det Norske Veritas (DNV) which found the three vessels have been well maintained was welcome.
“While the ferries are aging, our external asset management review, concluded there are no systemic issues to prevent them providing a safe and reliable service until 2029. However, that is subject to the increased maintenance and asset management, projected investment and the regulatory compulsory maintenance programmes.”
Reidy says safety remains a key focus across KiwiRail, with a commitment to a philosophy that all injuries are preventable.
“As part of a multi-year programme, we have been investing over the last year in leadership safety skills, which are tools for 180 of our senior leaders. This is starting to significantly reduce injuries and high potential near-miss critical events, particularly in our Interislander and freight operations where we have achieved injury reductions of over 35% compared with the previous year.
“In FY24, injuries reduced by 11% and, importantly, high-potential critical risk near-miss events fell by 71% – a positive reinforcement of an improving trend in our safety culture.
Reidy says FY24 was challenging for the New Zealand freight and passenger transport sector.
“Despite this, we have improved our operating performance across safety, asset availability and service reliability for customers, achieved significant milestones in our $1.5b capital expenditure across our business, refreshed our senior leadership executive team with a strong operational bias and built an ambitious plan with our people for the future.”
