TRANZ RAIL REPORTS FINANCIAL RESULT FOR THE THIRD QUARTER WELLINGTON, New Zealand, April 28 /PRNewswire/AsiaNet/ -- Tranz Rail Holdings Limited (New Zealand Stock Exchange: TRH) (Nasdaq: TNZRY) today reported net profit for the quarter ended 31 March 1998 of NZ$15.4 million, or 12 cents per ordinary share compared to NZ$20.6 million, or 16 cents per ordinary share for the same quarter in the prior year. The lower net profit figure reflects continued difficult trading conditions being experienced in the New Zealand economy and the impact of the Asian financial crisis in the forestry, coal and tourism sectors. Tranz Rail Holdings Limited's Chairman Edward A. Burkhardt said today that despite the continued weakness in the New Zealand economy the Company still achieved a 1% growth in revenue. Operating costs have been impacted by three separate incidents in the month of March 1998 being the Ngaruawahia derailment, Mercury Energy (Auckland CBD power outage) and The Lynx bow damage. These March incidents resulted in a NZ$1.7 million net cost. Operating costs for the quarter were also adversely affected by service disruptions and other minor derailments resulting in an additional NZ$2.0 million of cost and by a weaker exchange rate resulting in additional costs of NZ$0.6 million. Revenue for the third quarter of the 1998 financial year was NZ$152.3 million, or 1% more than the NZ$150.3 million reported in the third quarter of the 1997 financial year. Tranz Link (freight) revenue increased NZ$0.5 million, or 1%. The increase was due to increases in agricultural and food products, and fertilizer, minerals and aggregates offset in part by declines in export coal, 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 1% resulting mainly from fertilizer, minerals and aggregates (28%), agricultural and food products (13%) and forestry (10%). Tonnage was down for coal (30%) and manufactured products (9%). Total revenue tonne kilometres for freight traffic increased 1% over the prior year with growth in fertilizer, minerals and aggregates (51%), agricultural and food products (20%) and forestry (6%). Revenue tonne kilometres decreased for coal (40%) and manufactured products (7%). Interisland passenger and vehicles revenue was $NZ0.6 million lower for the quarter primarily as a result of a five percent decline in passenger volume. Tranz Metro fare revenue for Wellington and Auckland grew by NZ$0.2 million compared to the third quarter of the 1997 financial year. Tranz Scenic services recorded a 1% increase in revenue above the prior year period, despite a 5% decline in passenger volume. Total operating costs for the third quarter of the 1998 financial year increased 5% to NZ$125.7 million from the NZ$119.2 million reported for the same quarter of the prior year. This increase is principally attributed to the NZ$2.8 million charge incurred for the three incidents in March, NZ$2.0 million for service disruptions and other minor derailments and NZ$0.6 million of higher lease costs relating to the sale and leaseback of certain rolling stock which was completed in December 1996. Labor costs were up NZ$1.1 million. Factors that contributed to the increase include wages associated with the service disruptions and minor derailments, wage increases with the settlement of new labor agreements in the second quarter of the 1998 financial year and NZ$0.6 million for the three incidents in March. Average full time equivalent ("FTE") staff numbers for the quarter ended 31 March 1998 were 4,792 which included 524 staff employed in capital programs compared with 4,707 FTE including 417 capital program staff for the quarter ended 31 March 1997. Materials costs were down 7% resulting from the Company's capital investment program which is continuing to improve infrastructure and rolling stock reliability as well as recycling materials instead of using more expensive new materials. Lease and rental costs were up 9%, primarily as a result of an increase in the lease costs (NZ$0.6 million) relating to the sale and leaseback of certain rolling stock which was completed in December 1996. The lease is denominated in United States dollars and the weakening of the exchange rate with the United States has given rise to this variance. The lease payments for the next five years have been hedged. Additionally the Company has incurred NZ$0.3 million of leasing costs for enhancements to computer processing capacity. Contractor costs were up 11%, primarily as a result of service disruptions and minor derailments, and increased volume from refrigerated road haul traffic and from door to door shipments. Fuel and traction electricity was down 9%, primarily as a result of reduced costs associated with the buy out of the lease of two transformers on the electrified section of the North Island Main Trunk and the replacement of electric traction with diesel traction between Arthurs Pass and Otira on the export coal route. Casualties and insurance costs were up 30%, primarily as a result of costs incurred for the three incidents in March. Operating profit for the 1998 third quarter decreased 14% to NZ$26.6 million from NZ$31.1 million for the same quarter in the prior year reflecting an operating ratio of 82.5% for the quarter versus 79.3% for the prior year quarter. Adjusting for the NZ$1.5 million charge for severances, the operating ratio for the quarter ended 30 September 1996 would have been 85.4%. Net interest expense and deferred financing costs amortization for the quarter ended 31 March 1998 increased NZ$2.5 million to NZ$3.5 million, principally as a result of increased debt to finance major capital investment projects that are being undertaken. Taxation expense decreased NZ$1.9 million over the provision taken in the third quarter of the 1997 financial year due to the decreased profit before tax. Results for the Nine Months Ended 31 March 1998 Net profit for the nine months ended 31 March 1998 was NZ$36.9 million, down NZ$7.8 million or 6 cents per ordinary share (18%) from the nine months ended 31 March 1997. The decrease in net profit was due primarily to the NZ$3.6 million pre-tax charge, in December 1997, to increase the 30 June 1997 redundancy provision, NZ$7.3 million higher lease costs relating to the December 1996 sale and leaseback of certain rolling stock, NZ$2.0 million of additional cost for service disruptions and minor derailments, and the NZ$1.7 million net cost for the three incidents in March offset in part by the reduced net interest expense and taxation provision. Tranz Link (freight) revenue was down 2% to NZ$297.3 million from the NZ$303.2 million reported in the nine months ended 31 March 1997. Revenue gains in fertilizers, minerals and aggregates (15%) and agricultural and food products (11%) were offset by lower revenues in coal (33%), forestry (6%) and manufactured products (6%). Revenue tonne kilometres for freight traffic increased 2%, while freight tonnage increased 3% 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 4% lower than the prior year period on a revenue per revenue tonne kilometre basis. Tonnage increased with gains in fertilizers, minerals and aggregates (41%), agricultural and food products (17%) and forestry (7%). Coal tonnage was 32% lower than in the nine months ended 31 March 1997. Operating costs for the nine months ended 31 March 1998 were NZ$372.6 million; an increase of NZ$15.2 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, NZ$7.3 million in higher lease costs related to the December 1996 sale and leaseback of certain rolling stock, and NZ$2.8 million for the three incidents in March. Cost containment initiatives improved material costs (NZ$2.6 million) and other costs (NZ$2.0 million). Operating profit for the nine months ended 31 March 1998 was NZ$62.6 million for an operating ratio of 85.6% which compares with NZ$77.7 million and 82.2%, respectively, for the nine months ended 31 March 1997. Excluding the NZ$3.6 million charge to increase the redundancy provision and the NZ$7.3 million higher lease costs, the operating ratio for the current nine month period would have been 83.1%. Net interest expense and deferred financing costs amortization for the nine months ended 31 March 1998 decreased NZ$2.9 million to NZ$8.4 million. Taxation expense decreased NZ$4.5 million over the provision taken in the first nine 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 US 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, 6,400 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. The Company also holds a 27% equity interest in Australian Transport Network Limited which operates freight services in Tasmania, Australia, utilizing 577 route kilometres (361 miles) of track, 37 locomotives and approximately 630 wagons (freight cars). ENDS PART ONEMORE.......