Annual Report 2015

F.18a ANNUAL REPORT 2015 KIWIRAIL ANNUAL REPORT | 2015 1 At a glance We avoid the need for 1.4 million truck trips a year on our roads We transport around 30% of New Zealand’s exports We move 18 million tonnes of freight and provide 13 million passenger trips a year We carry 16% of New Zealand’s total freight volume We are a significant property holder We operate, maintain and improve 4,000km of track network RICHIE ROWLANDS (Uncle) Remote2 ControlTRUSTED Operator KIWI-OWNED LOGISTICS PARTNER GROWING NEW ZEALAND 50% Reduction in Total Recordable Injury Frequency Rate 17% $91 million Improvement in operating surplus Operating Surplus Strong performance in our Interislander, Scenic Journeys 56% Reduction in mainline and Property business groups train derailments together with efficiency gains across the business have resulted in a 17% 20% improvement in operating Improvement in surplus over the previous year. operating margin 4% Reduction in operational cost per employee KIWIRAIL ANNUAL REPORT | 2015 3 Whangarei Dargaville 18 million tonnes of freight AUCKLAND moved each year by rail 900 freight trains each week Tauranga Hamilton Kawerau Te Kuiti Kinleith New Plymouth Taumarunui Stratford Waiouru Napier Tranz Metro provides 12 million Wanganui passenger journeys per year Dannevirke Palmerston North Otaki Masterton Featherston Picton Blenheim WELLINGTON Westport Reefton Greymouth Kaikoura Hokitika 1,500+ bridges CHRISTCHURCH Ashburton Interislander carries 800,000 passengers per year Timaru Oamaru Port Chalmers Wairio Dunedin Invercargill Bluff 183 serviceable mainline locomotives and 4,665 serviceable freight wagons “The current New Zealand Government’s investment and growing confidence in KiwiRail is a sign of an emerging understanding of the importance of rail to the New Zealand economy.” Bruce Plested Executive Chairman, Mainfreight Contents Chairman Review �� 6 Chief Executive Review ..................................... 10 Commercial Review........................................... 14 Above/Below Rail .............................................. 14 KiwiRail Board �� 16 KiwiRail Executive Team ................................... 18 Sustaining a Zero Harm Environment ............... 20 Our People ........................................................ 22 Freight ............................................................... 24 Interislander ....................................................... 25 Tranz Metro ....................................................... 26 Infrastructure ..................................................... 27 Property �� 28 Scenic Journeys ................................................ 29 Key Financials ................................................... 30 Audited Annual Financial Statements �� 32 Key Performance Indicators .............................. 80 ANDREW SHIPP Team Leader “I would like to thank our many customers who continue to show strong support for our business.” John Spencer Chairman Chairman Review It is pleasing to reflect on a year of recovery and a range of future options from consolidation in which KiwiRail improved its profitability, maintaining the status quo to closing the network entirely. worked on implementing its customer-focused business Ministers considered the Review model, and considered its role in the wider transport sector. and in Budget 2015 they expressed After significant disruptions in the increased their revenues, reflecting our their commitment to a national freight 2014 financial year, 2015 was a ongoing commitment to lift KiwiRail’s network. Finance Minister Bill English year of consolidation with the new financial performance by focusing on announced $210m in new capital management team led by Chief customers’ needs and working with for the company in Budget 2015, Executive Peter Reidy focusing on its our employees and unions to improve and announced a pre-commitment task of uniting “One KiwiRail”, building efficiency. of a further $190m against Budget customer confidence, aspiring to 2016. However, the Government Commercial Review Zero Harm and lifting the company’s also indicated KiwiRail must continue financial performance. During the year the most significant to drive significant efficiency and piece of work for the Board was the productivity improvements to reduce During the year we adopted a Commercial Review. It arose from the ongoing level of Crown funding new vision statement for the an undertaking given by the KiwiRail required. company, which is to be a “trusted Board to Shareholding Ministers Over the last financial year the Kiwi-owned logistics partner that the company would develop a growing New Zealand”. Board and the Executive Team have refreshed, comprehensive long-term had a strong focus on simplifying The aspiration to be trusted is view of its business. the business, reducing the cost important. It means being trusted by The Review was completed of operations and building the our customers and passengers to get in December 2014 and was consistent on-time performance them and their freight delivered safely an opportunity to engage with that our customers expect. The and efficiently. It means being trusted Government on long-term funding Government’s Budget announcements by our staff to be a good employer, and options and future network and expectations reinforce our on- trusted by our shareholding ministers configurations. The Review found that going commitment to drive savings to continually look for improvements financial self-sufficiency of the network and improve efficiency across the in running the company. On all those is not achievable. It confirmed that business. counts, the Board, management and it is difficult for KiwiRail to increase True Value staff share a strong commitment to revenue from commodity-based delivery. sectors and to improve productivity The public release of Treasury documents relating to the Commercial Financial Performance given historical inflexible labour agreements. Additionally, given the Review sparked debate over the true KiwiRail’s operating surplus of $91m in capital-intensive nature of rail, there value of rail. One oft-quoted figure is FY15 is a 17% improvement over the are implications should we retain that if all the freight currently carried previous year and is a credible result the national network in its entirety. by our trains was moved to the road, in the current environment, despite However, the Review also identified a it would need an additional 1.4m truck revenue falling by 3% to $721m. number of opportunities for KiwiRail. trips. That is another way of looking at the value of rail. Our Interislander, Scenic Journeys It reviewed the economics of each rail and Property business groups all corridor and service, and provided KIWIRAIL ANNUAL REPORT | 2015 7 Chairman Review continued Media reporting that Ministers could for example, there was doubt over Regional Council and Horizons have decided to close the freight the future of the Capital Connection Regional Council, who wanted the network prompted some of our link to continue, the service has been important customers to go public in secured for another three years. their support of KiwiRail, and of rail “Ministers Optimising Investment generally. Taking a wider view of the value and While we welcome this broader considered the funding of rail will inevitably lead to discussion, it in no way undermines or questions about the sustainability distracts the Board and management Review and it is of the current structure. In addition, from the importance of lifting the thinking more broadly about rail invites company’s performance. well known that further discussion about integrating Local communities are certainly willing in Budget 2015 rail into land transport planning and to be vocal in their support of retaining investment, so that optimal use is rail services in their own areas. they expressed made of public and private investment However, there is a balance to be in transport infrastructure. struck here because while regions may their commitment KiwiRail welcomes the opportunity value the presence of rail, KiwiRail to work more closely with the New cannot continue to support lines that to a national Zealand Transport Agency to ensure are plainly uneconomic and where we make best use of taxpayer money there is no prospect of profitability freight network.” and deliver a transport system that occurring in the medium term. is as effective, efficient and resilient In some cases, the company would as possible. I believe that not only commuter service between Wellington be prepared to look at other funding KiwiRail, but New Zealand as a whole and Palmerston North because it models if communities choose to offer has much to gain from a strategy that was uneconomic for KiwiRail to support to maintain a service that values rail’s contribution to moving operate. However, with financial they value, and which is uneconomic freight and people. contributions from Greater Wellington for KiwiRail to continue. This year, MICHELLE APPLETON Onboard Service Manager 8 TRUSTED KIWI-OWNED LOGISTICS PARTNER GROWING NEW ZEALAND TRUSTED KIWI-OWNED LOGISTICS PARTNER GROWING NEW ZEALAND 9158 9158 4000 18,000 4000 3100 120,000 140+ 18,000,000 1500+ 183 4600 employees; ha of land km of signals that TranzAlpine tunnels; tonnes of bridges; mainline Interislander 25% have holdings; track;

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