More Tranz rail Restructuring

["John Regan" <reganjd@clear.net.nz>]

Tranz Rail allowing more for restructuring

Tranz Rail has allowed for another $15.5 million in restructuring and
redundancy costs in its annual result, on top of the $10.6m spent during the
year.

For the 12 months ended June 30, Tranz Rail yesterday reported an after-tax
profit of $70.16m, up 45.5 per cent on the $48.22m reported a year earlier.

The result was boosted by a $57.3m tax credit. This was not an actual cash
payment, executive manager Mark Bloomer said, but related to deferred tax
provisions and timing differences.

The full-year result, including non-recurring items, had given Tranz Rail a
loss for tax purposes, he explained. Because of this, Tranz Rail was able to
bring its deferred tax into the result, effectively giving the tax credit.

Operating profit before tax was down 81.5% at $12.926m. This included the
restructuring costs of $26.1m and an $11m write-down on costs related to
investigating new projects because of a change in accounting policy.

If the non-recurring items are taken out of the final result, the profit was
up 88% at $95m. In the previous year non-recurring items totalled $2.4m.

Operating cash flow fell 35.6% to $48.725m. Mr Bloomer said this was
affected by three large capital projects during the year; the new Aratere
ferry, the upgrading of the Middleton yard in Christchurch, and a new
financial accounting system.

Since December capital expenditure had returned to more normal levels, he
said, and the company had not had to use its lines of credit this year.
Capital expenditure over the next two years was expected to come from
existing cash flow.

Despite higher tonnages freight revenue fell $1.8m to $420.3m compared with
the 1998 year. Tonnage and revenue tonne kilometres increased by 10% and 3%
respectively but were offset by lower average rates.

Revenue from coal showed the greatest fall, down 19.6% at $28.8m, while
fertiliser and mineral revenue fell 14% to $15.2m. The largest sector,
agricultural and food products, had a 5.2% fall to $155m in revenue.

The passenger service had revenue of $131.5m, just $400,000 lower than the
previous year.

Mr Bloomer could not say how many redundancies there would be in the coming
round, but he expected the restructuring to be over by the end of the year.

Staff were aware of the restructuring, and areas had been selected where
cuts would be made, he said.

The company's dividend decision will be made at a board meeting this month.
Because of the tax credit there would be no imputation credits available.

The net tangible asset backing at balance date was 362.8c, from 333.7c last
year. Yesterday's closing price was 344. The result was released after the
sharemarket closed.

Earnings per share were 58.1c, up from 39c.

The ratio of debt to debt plus equity at balance date was 51%, while
borrowings alone were 29.7%.


http://www.press.co.nz/1999/31/990804b03.htm