Lifting performance to deliver growth for New Zealand 

Performance highlights: 

• Above rail operating surplus up 17 per cent to $156.5m
• $1.3 billion invested in assets and capital projects
• High-risk safety incidents reduced by 4 per cent; safety culture programme underway
• Freight revenue up 8 per cent to $501.3m
• Interislander revenue up 42 per cent to $151.1m
   

KiwiRail has achieved an improved operating surplus in its above rail operations of $156.5m[1] for the year ended 30 June 2023, up 17 per cent on the prior year. 

 Board Chair David McLean says KiwiRail is successfully positioning itself for future growth as the substantial investment in infrastructure, systems and rolling stock assets begins to deliver the improved performance allowing it to play its vital role in decarbonising the land transport system. 

 FY23 also saw a significant $1.3 billion of capital expenditure across the organisation, spending that will allow KiwiRail to deliver its growth plan through a reliable network, new rolling stock and the continued investment in the new ferries. 

 Mr McLean says the State-Owned Enterprise is strengthening its culture and is resetting its operational performance despite the many challenges it faced during the year.  

 Those challenges included the impact of abnormal weather events in Auckland and Northland, and of Cyclone Gabrielle, which had an adverse impact of $8.5m on the operating surplus. 

 “The KiwiRail team is delivering a 24/7 effort to repair the damage as quickly as possible in the wake of that devastating event, with the rail line to Napier reopening ahead of schedule in September 2023 and the network to Northland expected to reopen early in the New Year.” 

 KiwiRail continued to move along the path of making its above rail business self-sustaining under the new funding model, which sees the ‘below rail’ (the network component of the railway) fully funded through the National Land Transport Fund (NLTF), supported by the Crown and by track-user charges from the market. 

 The below rail EBITDA was neutral, in line with budget and the previous year.  

 KiwiRail Chief Executive Peter Reidy says that over the past 12 months, progress has been made in strengthening KiwiRail’s leadership capability, operational discipline, asset management and investing in a platform for customer and commercial growth.

 “Care and Protect is a core value for the company and building health and safety leadership to drive safety performance improvements is a personal commitment for me. Safety is a proxy for leadership, and we are starting to see a shift in reducing high-risk incidents. 

 “We’ve embarked on a leadership safety culture reset supported by global experts, a two-year roadmap and funding commitment from our Board. I am confident the changes we are making will build a belief that all injuries and occupational illnesses are preventable, and that management is responsible to ensure everyone goes home safe at the end of each day. 

 “We have formally relaunched High Performance High Engagement (HPHE) with our four union partners. HPHE is a way for those in the workplace to have an opportunity to get involved in finding solutions to improve health and safety, productivity, efficiency and customer service delivery outcomes. I welcome the support we are receiving from our union partners to involve our frontline people as a foundation pillar of our culture, and deliver strong outcomes for our customers, our people and stakeholders.

“Despite the challenges during the year, we have continued to invest in our infrastructure and lifted asset availability and reliability for customers. This positively impacted our export-led customers, enabling them to deliver stronger export volumes, particularly in the final quarter.

 “Total freight revenue was $501.3m, up 8 per cent for the year, including solid growth in the import/export (IMEX) market, with a strong finish to the year in the dairy sector as export prices strengthened. We have continued strong commercial discipline and re-negotiated several large commercial freight contracts with Port of Tauranga and Fonterra during the year. 

 “With an end to Covid lockdowns and a rebound in tourism, Interislander improved its performance with a 42 per cent increase in revenue to $151.1m. We had fleet reliability issues in January and February which severely disrupted our customers and New Zealand. We have acknowledged and taken full responsibility for these events, which has led us to invest and partner with global experts to improve the reliability and on-time performance of our ageing fleet for our customers. Overall, Interislander reliability improved from 79 per cent in FY22 to 87 per cent in FY23, and is now well above the 90 per cent mark. 

“The rebound in tourism also drove a more than 600 per cent growth in revenue to $24.5m from KiwiRail’s scenic rail services, which were able to operate across the full year.  

 “To build on the growing interest in rail tourism, in FY23 Great Journeys New Zealand launched a suite of short trip packages, multi-day and fully guided tours, and upgraded its meal offerings as it constantly seeks to improve its services. The packages and tours will see benefits for regional economies – from tourism operators to local transport companies, accommodation providers and restaurants.”

 Playing a leading role in decarbonising New Zealand’s land transport system remains a key ambition for the company and Mr Reidy says KiwiRail will be building on its existing commitment to cut its emissions.

 “The Government has announced funding that will allow us to look in detail at how best to electrify more North Island rail lines including the freight-heavy Golden Triangle (Tauranga – Hamilton – Auckland), and how best to complete electrification on the main North Island rail line between Palmerston North and Wellington.”

 ”In the near term, it is our intention to re-join the Climate Leaders Coalition, a coalition of New Zealand businesses working together to accelerate the transition towards a zero carbon and climate resilient future. Meeting the minimum requirements to join the coalition will require us to reset our targets and adopt short and long-term science-aligned targets to limit future warming to 1.5 degrees Celsius. Work is already underway and we plan to publish our new targets in the next financial year.

 He adds, “recent years have seen a substantial broader investment in KiwiRail and the results of that are starting to be seen.

 “During the year, $1.3 billion was invested in assets and capital projects including progress on three major NZ Upgrade Projects (Wiri to Quay Park/Third Main, Papakura – Pukekohe electrification, and Drury Rail Stations). The first stage of Auckland's Rail Network Rebuild was completed on time, and we continued construction of our Waltham mechanical hub in Christchurch. Production also commenced on the first two of 57 new, state-of-the-art, low-emission mainline locomotives.”

 Mr Reidy says that challenging conditions will remain for the year ahead, with a softening freight market and a general tightening of the economy. “We are responding with a series of measures including fuel minimisation, train optimisation and control of our compressible cost and overheads.

 “I want to thank our customers for their ongoing commitment to our rail, ferry and property services.  

 “I also want to acknowledge the way our team responded in the face of significant challenges and how we are connecting as ‘one KiwiRail’ to improve safety, build consistent service reliability for customers, and deliver operational excellence to position KiwiRail for growth in the medium term.

 “KiwiRail made good progress in FY23. Our goal now is to build on this platform, with an unwavering focus on health and safety. We look forward to delivering increased value for our customers and a more sustainable transport system for New Zealand.”  

Key Figures:

 Comparison with Statement of Corporate Intent (SCI)

We have met our FY24-FY26 SCI forecast operating surplus target of $150m - $165m.

 Consistent with the Statement of Corporate Intent, KiwiRail will not pay a dividend for the year ended 30 June 2023.

  1 Operating surplus represents earnings before depreciation & amortisation, interest, impairment, capital grants, fair value changes and tax. FY23 operating surplus excludes the impact of non-recurring items.