WELLINGTON, New Zealand, Jan. 28 /PRNewswire/Asianet/ -- Tranz RailHoldings Limited (Nasdaq: TNZRY) (NZSE: TRH) today reported net profit for thequarter ended 31 December 1997 of NZ$14.2 million, or 11 cents per ordinaryshare compared to NZ$14.7 million, or 12 cents per ordinary share for the same quarter in the prior year. The lower profit figure reflects continued difficult trading conditions being experienced in the New Zealand economy which limited revenue growth to 2% over the prior year. It also includes a NZ$2.4 million after tax charge (2 cents per share) to increase the redundancy provision reported in the 30 June 1997 results due to a new labour agreement settled in the second quarter. Tranz Rail Holdings Limited's Chairman Edward A. Burkhardt said today that Tranz Rail's operating result reflects the continued weakness in the New Zealand domestic economy and is consistent with the Company's performance in recent quarters. Revenue for the second quarter of the 1998 financial year was NZ$153.4 million, or 2% more than the NZ$150.9 million reported in the second quarter of the 1997 financial year. Tranz Link (freight) revenue decreased NZ$1.3 million, or 1%. The decrease was due to declines in export coal traffic, forestry and manufactured products. The export coal shipments from the West Coast of the South Island continue to be impacted by the difficult trading conditions being experienced in international coal markets. Total Tranz Link tonnage was up 4% resulting mainly from fertiliser, minerals and aggregates (20%), agricultural and food products (19%) and forestry (13%). Tonnage was down for coal (27%) and manufactured products (4%). Total revenue tonne kilometres for freight traffic increased 3% over the prior year with growth in fertiliser, minerals and aggregates (47%), agricultural and food products (18%) and forestry (6%). Revenue tonne kilometres decreased for coal (27%). Interisland passenger and vehicles revenue was higher for the quarter primarily as a result of higher per passenger yield on a one percent decline in passenger volume. Tranz Metro revenue for Wellington and Auckland grew by NZ$1.0 million compared to the second quarter of the 1997 financial year primarily due to reimbursement of expenditure incurred in upgrading the Wellington EMU passenger carriages. Tranz Scenic services recorded an 8% increase in revenue above the prior year period. Tranz Rail is currently evaluating the impact of the Asian financial crisis in the forestry, coal and tourism sectors. While the impact is presently unclear, Tranz Rail is currently taking steps to alter its cost structure appropriate to possible lower volume levels. Total operating costs for the second quarter of the 1998 financial year increased 6% to NZ$130.2 million from the NZ$122.3 million reported for the same quarter of the prior year. This increase is principally attributed to the NZ$3.6 million charge to increase the redundancy provision and NZ$3.5 million of higher lease costs relating to the sale and leaseback of certain rolling stock which was completed in December 1996. Labour costs were up NZ$2.0 million. Factors that contributed to the increase include increased wages as a result of the settlement of a new labour agreement in the second quarter. Average full time equivalent ("FTE") staff numbers for the quarter ended 31 December 1997 were 4,713 which included 585 staff employed in capital programmes compared with 4,671 FTE including 423 capital programme staff for the quarter ended 31 December 1996. Materials costs were down 8% resulting from the Company's capital investment programme which is continuing to improve infrastructure and rolling stock reliability as well as recycling materials instead of using more expensive new materials. Purchased services were up 18% primarily as a result of costs associated with re-engineering and Year 2000 information system projects initiated during the previous financial year and higher contractor costs related to recovery of obsolete material and scrap. Lease and rental costs were up 47%, primarily as a result of the lease costs (NZ$3.5 million) relating to the sale and leaseback of certain rolling stock which was completed in December 1996. Operating profit for the 1998 second quarter decreased 19% to NZ$23.2 million from NZ$28.6 million for the same quarter in the prior year reflecting an operating ratio of 84.9% for the quarter versus 81.1% for the prior year quarter. This reduction in operating profit is inclusive of the NZ$3.5 million in additional lease costs for the December 1996 sale and leaseback and the NZ$3.6 million charge to increase the 30 June 1997 redundancy provision. Net interest expense and deferred financing costs amortisation for the quarter ended 31 December 1997 decreased NZ$3.6 million to NZ$2.7 million, principally as a result of the repayment of debt following the December 1996 sale and leaseback transaction. Taxation expense decreased NZ$1.3 million over the provision taken in the second quarter of the 1997 financial year due to the decreased profit before tax. RESULTS FOR THE HALF YEAR ENDED 31 DECEMBER 1997 Net profit for the six months ended 31 December 1997 was NZ$21.5 million, down NZ$2.6 million or 2 cents per ordinary share (11%) from the six months ended 31 December 1996. The decrease in net profit was due primarily to NZ$1.9 million lower revenue, the NZ$3.6 million pre-tax charge to increase the 30 June 1997 redundancy provision and NZ$7.0 million in higher lease costs relating to the December 1996 sale and leaseback of certain rolling stock offset in part by the reduced net interest expense and taxation provision. Tranz Link (freight) revenue was down 3% to NZ$198.5 million from the NZ$204.8 million reported in the half year ended 31 December 1996. Revenue gains in fertilisers, minerals and aggregates (12%) and agricultural and food products (8%) were offset by lower revenues in coal (31%), forestry (6%) and manufactured products (5%). Revenue tonne kilometres for freight traffic increased 3%, while freight tonnage increased 4% over the prior year period. Competition remained strong for most of the Company's freight traffic which resulted in downward pressure on freight rates which were 6% lower than the prior year period on a revenue per revenue tonne kilometre basis. Tonnage increased 4% overall with gains in fertilisers, minerals and aggregates (21%), agricultural and food products (16%) and forestry (15%). Coal tonnage was 25% lower than in the six months ended 31 December 1996. Operating costs for the six months ended 31 December 1997 were NZ$246.9 million; an increase of NZ$8.7 million (4%) over the prior year period. Costs increased primarily as a result of the NZ$3.6 million pre-tax charge to increase the 30 June 1997 redundancy provision, costs related to re- engineering and Year 2000 information technology projects (NZ$3.4 million), and NZ$7.0 million in higher lease costs related to the December 1996 sale and leaseback of certain rolling stock. Cost containment initiatives improved material costs (NZ$2.2 million), other costs (NZ$2.1 million) and insurance (NZ$0.8 million). Operating profit for the six months ended 31 December 1997 was NZ$36.0 million for an operating ratio of 87.3% which compares with NZ$46.6 million and 83.7%, respectively, for the six months ended 31 December 1996. Excluding the NZ$3.6 million charge to increase the redundancy provision and the NZ$7.0 million higher lease costs, the operating ratio for the current six month period would have been 83.5%. Net interest expense and deferred financing costs amortisation for the six months ended 31 December 1997 decreased NZ$5.4 million to NZ$4.8 million. Taxation expense decreased NZ$2.6 million over the provision taken in the first six months of the 1997 financial year due to decreased profit before tax. Shares of Tranz Rail Holdings Limited are publicly traded on the New Zealand Stock Exchange under the symbol TRH and the U.S. American Depositary Shares (ADS) of the Company are traded on the Nasdaq National Market System under the symbol TNZRY (each ADS is equivalent to three (3) shares). The Company is the leading multi-modal freight transport and distribution company in New Zealand and operates the only commercial railroad providing freight and passenger services utilizing 3,900 route kilometres (2,400 miles) of track, approximately 360 locomotives, 6,900 wagons (freight cars), 150 carriages (passenger railcars), 170 self propelled passenger railcars, 2,600 shipping containers and three roll-on roll-off ferries between the North and South Islands. TRANZ RAIL HOLDINGS LIMITED Quarter Ended 31 December 1996 1997 (unaudited) (NZ GAAP) NEW ZEALAND DOLLARS (in millions except per share data) Total revenue $150.9 $153.4 Total operating costs $122.3 $130.2 Operating profit $28.6 $23.2 Operating ratio 81.1% 84.9% Net profit $14.7 $14.2 Average ordinary shares outstanding (fully diluted) (in thousands) 127,100 127,622 Earnings per ordinary share (fully diluted) $0.12 $0.11 Quarter Ended 31 December 1996(b) 1997(b) (unaudited) (NZ GAAP) UNITED STATES DOLLARS (in millions except per ADS data) Total revenue $106.3 $94.9 Total operating costs $86.2 $80.5 Operating profit $20.1 $14.4 Operating ratio 81.1% 84.9% Net profit $10.3 $8.9 Average American Depositary Share equivalents outstanding (fully diluted) (in thousands)(a) 42,367 42,541 Earnings per American Depositary Share equivalent (fully diluted)(a) $0.24 $0.21 (a) One American Depositary Share (ADS) represents three ordinary shares, (b) New Zealand dollar amounts have been translated into US dollars for convenience at the average daily rate of NZ$1.00 = US$0.7049 and NZ$1.00 = US$0.6166 for the quarters ended 31 December 1996 and 31 December 1997, respectively, based on the noon buying rate for New Zealand dollars as reported by the Federal Reserve Bank of New York. TRANZ RAIL HOLDINGS LIMITED Six Months Ended 31 December 1996 1997 (unaudited) (NZ GAAP) NEW ZEALAND DOLLARS (in millions except per share data) Total revenue $284.8 $282.9 Total operating costs $238.2 $246.9 Operating profit $46.6 $36.0 Operating ratio 83.7% 87.3% Net profit $24.1 $21.5 Average ordinary shares outstanding (fully diluted) (in thousands) 126,952 127,611 Earnings per ordinary share (fully diluted) $0.19 $0.17 Six Months Ended 31 December 1996 1997 (unaudited) (NZ GAAP) UNITED STATES DOLLARS (in millions except per ADS data) Total revenue $198.8 $178.7 Total operating costs $166.3 $156.0 Operating profit $32.5 $22.7 Operating ratio 83.7% 87.3% Net profit $16.8 $13.6 Average American Depositary Share equivalents outstanding (fully diluted) (in thousands)(a) 42,317 42,537 Earnings per American Depositary Share equivalent (fully diluted)(a) $0.40 $0.32 (a) One American Depositary Share (ADS) represents three ordinary shares. (b) New Zealand dollar amounts have been translated into US dollars for convenience at the average daily rate of NZ$1.00 = US$0.6981 and NZ$1.00 = US$0.6318 for the six months ended 31 December 1996 and 31 December 1997, respectively, based on the noon buying rate for New Zealand dollars as reported by the Federal Reserve Bank of New York. TRANZ RAIL HOLDINGS LIMITED PERFORMANCE HIGHLIGHTS Tranz Rail's net profit for the quarter to 31 December 1997 was NZ$14.2 million on revenue of NZ$153.4 million. Net profit decreased NZ$0.5 million (3%) on the second quarter of the 1997 financial year. Revenue increased NZ$2.5 million (2%) on the second quarter of the 1997 financial year. Key comparisons between the quarters, last year in parenthesis: -- Operating profit NZ$23.2 million (NZ$28.6 million) -- Operating ratio 84.9% (81.1%) -- Rail passenger revenue up 9% -- Ferry passenger and vehicle revenue up 4% -- Tranz Link (freight) revenue down 1% -- Revenue tonnes(OOOs) 3,043 (2,933) Tranz Rail's net profit for the six months to 31 December 1997 was NZ$21.5 million on revenue of NZ$282.9 million. Net profit decreased NZ$2.6 million (11 %) on the first six months of the 1997 financial year. Revenue decreased NZ$1.9 million (1%) on the first six months of the 1997 financial year. Key comparisons between the six months, last year in parenthesis: -- Operating profit NZ$36.0 million (NZ$46.6 million) -- Operating ratio 87.3% (83.7%) -- Rail passenger revenue up 8% -- Tranz Link (freight) revenue down 3% -- Revenue tonnes(OOOs) 5,876 (5,637) SOURCE Tranz Rail Holdings Limited 01/28/98 CONTACT: Ronald G. Russ, Executive Manager and Chief Financial Officer of Tranz Rail Holdings Limited, Domestic: 04-498-2099, International: 644-498-2099, or fax: 644-498-2014/ (TNZRY TRH)