By NZPA
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Wednesday 10th July 2002 |
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Tranz Rail's statement to the stock exchange today comes amid fallout from its announcement on Friday that its fourth quarter result would be significantly below expectations.
Shares in Tranz Rail began tumbling in late May, reaching record lows this week before closing today up 10c at $2.50. On Monday, the shares fell to $2.56, then their lowest point since Tranz Rail was privatised in 1993.
The market had been picking an operating profit before reorganisation costs of $36 million, but the actual result would be in the order of between $24 million and $26 million, Tranz Rail managing director Michael Beard said today.
"To put that announcement in perspective, we have consistently indicated that the 2002 financial year will be most affected by the change programme, with the first signs of benefits coming in the 2003 financial year."
Tranz Rail posted a net after-tax profit of $2.8 million for the three months ended March 31, down from the $13.1 million profit recorded previously because of restructuring costs.
Analysts at Multex Global picked Tranz Rail to post a net profit of $27 million for 2002, rising to $55.7 million in 2003.
He said claims in the media yesterday from Tranz Rail critics that the company had "capitalised routine maintenance expenditure and used this to inflate the book value of its track network by more than $300 million since 1993, enabling it to report higher profits" were incorrect.
"Unfortunately, the company's announcement last Friday has resulted in some speculation reported in the financial press that is both erroneous and ill informed," Mr Beard said.
Since 1993 the company had invested a total of $169 million on track renewals and a further $17 million on track destressing.
"Over the same period a depreciation charge of $45 million on track has been applied to Tranz Rail's accounts. This treatment is entirely consistent with New Zealand and United States accounting standards and is consistent with the treatment applied by comparable international railroad companies.
"None of the asset write-downs currently being considered by the company relate to its track infrastructure.
"It should be noted that while the company's 2002 financial year result is below market expectations, we will achieve an operating profit before reorganisation costs of $24 million to $26 million and improve our cash position by around $85 million, as a consequence of which we have significantly reduced the company's debt," he said.
The Market Surveillance Panel is studying the company's response to its "please explain" request, issued last Thursday, after its shares fell significantly.
Credit rating agencies warned they are keeping an eye on Tranz Rail, which is in the process of transforming into a long distance cargo operator, as it struggles to achieve profitability.
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