On track for a new chal­lenge

Bay of Plenty Times - - WORLD -

After four years of driv­ing change at Ki­wiRail, de­part­ing chief ex­ec­u­tive Peter Reidy’s next mis­sion is head­ing Fletcher Build­ing’s strug­gling con­struc­tion di­vi­sion. Is this man a glut­ton for pu­n­ish­ment? “It’s a very strong lead­er­ship and cul­ture chal­lenge, re­build­ing mar­ket trust and peo­ple’s con­fi­dence,” he says diplo­mat­i­cally. “It’s an ex­cit­ing chal­lenge, as Ki­wiRail was when I came back from Aus­tralia to New Zealand.”

Be­fore join­ing Ki­wiRail, Reidy was with con­struc­tion com­pany Downer for seven years in Aus­tralia, work­ing across a broad range of in­fras­truc­ture — roads, min­ing and rail.

Ki­wiRail is also a very large in­fras­truc­ture builder, he says. “We’d spend $300 mil­lion a year on cap­i­tal for in­fras­truc­ture up­grades. So it’s not un­com­mon ter­ri­tory.”

His next move is also per­sonal, he says. “My fa­ther spent 42 years at Fletcher. I grew up with Fletcher and so there’s a bit of want­ing to get in and make sure it’s strong for New Zealand again.”

Reidy’s fa­ther Bill — who passed away two years ago, aged 90 — had a long ca­reer with Fletcher Hold­ings and then Fletcher Chal­lenge, in­clud­ing 15 years as group gen­eral man­ager of Fletcher Steel and di­rec­tor of Pa­cific Steel.

“We spent many years as a fam­ily at the Fletcher Christ­mas fam­ily pic­nics and I worked in the steel mill and wire mill in my teenage years dur­ing hol­i­days,” Reidy says.

There’s cer­tainly a sense of home­com­ing about his new role — as there was with his re­turn to New Zealand to take on Ki­wiRail.

“The whole rea­son I came back for this job was for NZ Inc. For New Zealand to grow, it needs a strong trans­port sys­tem. And the same for Fletch­ers, for New Zealand to grow it needs a strong Fletch­ers.”

De­spite a rot­ten cou­ple of years which has seen Fletcher Build­ing’s losses mount and its mar­ket value drop by about 40 per cent, share­hold­ers will be op­ti­mistic that its di­vi­sions like con­struc­tion can be re­turned to prof­itabil­ity rel­a­tively quickly.

Fletcher is re­struc­tur­ing its busi­nesses un­der new chief ex­ec­u­tive Ross Tay­lor, which means get­ting the con­struc­tion unit back on track after it took on a num­ber of un­prof­itable projects in its build­ing and in­te­ri­ors busi­ness. At Ki­wiRail, things are not so sim­ple. Reidy con­cedes the rail op­er­a­tor will prob­a­bly al­ways re­quire gov­ern­ment sup­port be­cause of the enor­mous in­fras­truc­ture costs it faces.

There are bright spots in the most re­cently pub­lished re­sults (the half-year to De­cem­ber 2017) in­clud­ing a $15.3m op­er­at­ing sur­plus — up 39 per cent on the prior year — and it is on track to meet its full-year op­er­at­ing sur­plus tar­get of $30m-$50m.

But there is no avoid­ing the bottomline loss of $193m for the pe­riod.

“The busi­ness will never be prof­itable in terms of sup­port­ing the in­fras­truc­ture,” Reidy says.

It is pro­foundly ham­pered by le­gacy as­sets — in­clud­ing track and en­gines — which have been un­der­funded for 40 years, he says.

There are also some in­her­ent geo­graph­i­cal is­sues in New Zealand that don’t help mat­ters.

Ba­si­cally, the coun­try is the wrong shape.

“It’s very dif­fi­cult. It’s long, skinny, lots of tun­nels. It’s very hilly and we’ve got nar­row-gauge rail.”

Es­sen­tially, that means we can’t stack trains with dou­ble-decker con­tain­ers or 150 car­riages like they do across the wide ex­panses of Aus­tralia and the US.

We also don’t have the freight vol­ume they have in Aus­tralia, where 90 per cent of freight is coal and iron ore.

“So we’ve got a liquorice all­sorts here and we’ve got to live with what we’ve got,” Reidy says.

“It’s a mix­ture of light freight, heavy freight, pas­sen­ger tourism, so it’s not an easy busi­ness to make money.

“We’re an SOE so we have a strong com­mer­cial fo­cus.” Even though Ki­wiRail is state-owned, tar­gets like rev­enue growth, mar­gin growth and cus­tomer en­gage­ment will al­ways be the start­ing point, he says.

But part of his mis­sion in the past four years has been to shift the con­ver­sa­tion about rail to one that looks more broadly at its value to the na­tion.

The na­ture of that con­ver­sa­tion had shifted to be­ing about “the value of rail and not the cost of rail,” he says.

“What you are start­ing to see now are tar­gets for en­vi­ron­ment, tar­gets for emis­sions, con­nec­tiv­ity to com­mu­nity, tar­gets for trucks off the road,” he says. “So it’s more of a holis­tic view of per­for­mance. Which I think is bet­ter for the busi­ness.”

Chal­leng­ing though it was for Ki­wiRail, the 2016 Kaiko¯ura earth­quake that cut the main trunk line from Pic­ton to Christchurch played an im­por­tant role in shift­ing the pub­lic per­cep­tion, he says.

“When the earth­quake hap­pened, New Zealand re­ally un­der­stood what hap­pens when rail is not there,” he says. “The cost to New Zealand is sig­nif­i­cant. When that hap­pened and rail wasn’t there, freight rates went up 20 per cent. Su­per­mar­kets could not get their goods into re­gions.

“How much money does that road make? No one knows be­cause it’s crit­i­cal in­fras­truc­ture,” he says. “We make good money in terms of the op­er­at­ing per­for­mance but the in­fras­truc­ture is core for New Zealand. Peo­ple are start­ing to see that now.”

It does seem that Reidy is leav­ing Ki­wiRail just as the fair winds of po­lit­i­cal sup­port have started to blow its way.

The cur­rent Gov­ern­ment has ac­tively shifted its trans­port pol­icy fo­cus from road to rail.

But Reidy says the change was al­ready un­der way and even Na­tional had started to bet­ter un­der­stand rail’s value.

“The last Gov­ern­ment was very sup­port­ive, they put a lot of money in. And to­wards the end of their ten­ure they were start­ing to talk about how we fund rail dif­fer­ently,” he says.

“This new Gov­ern­ment has picked that up and we’re look­ing at a longert­erm fund­ing ar­range­ment.”

There is a more in­te­grated fo­cus on fund­ing road and rail to­gether.

That change is part of a “re­nais­sance for rail” which is tak­ing hold around the world, he says.

“You’ve only got to look at traf­fic from Hamil­ton to Auck­land on the South­ern Mo­tor­way at 6 in the morn­ing.

“Peo­ple are say­ing how do we get on to pub­lic trans­port? Auck­lan­ders took 20 mil­lion train trips a year — 10 years ago it was 4 mil­lion.”

That growth is start­ing to flow on to trade and tourism.

Tourists’ use of rail is up 20 per cent, con­tainer growth is 18 per cent, forestry 12 per cent and over­all pas­sen­ger growth 18 per cent. The In­ter­is­lander had its best year ever in terms of num­bers across Cook Strait, he says.

“So I’m re­ally pos­i­tive about the growth shoots com­ing through. We’re see­ing strong growth in things like that [although] we’ve seen a de­cline in coal and liq­uid milk which is the his­tor­i­cal mix of what freight used to be.”

Reidy says he’s also proud of the work­place cul­ture he’ll leave be­hind at Ki­wiRail, in­clud­ing “a very strong, trust­ing re­la­tion­ship” with the Rail & Mar­itime Trans­port Union.

“They are fa­mously tough,” Reidy says. “More than 75 per cent of our peo­ple are mem­bers of the union.”

Ki­wiRail adopted Air New Zealand’s high per­for­mance, high en­gage­ment strat­egy with great re­sults.

“It’s all about lead­ers let­ting go and your front­line work­ers tak­ing own­er­ship of prob­lems,” Reidy says. “The last pay deal we did, we ne­go­ti­ated that in four hours. What it means is we deal with all the is­sues like fa­tigue and ros­ter­ing in fully worked pro­grammes with our peo­ple. So when you sit down to ne­go­ti­ate it’s just a rates and date deal.”

When Reidy started at Ki­wiRail in 2014 it was four years into a 10-year turn­around plan which he de­scribes as overly am­bi­tious.

“It was look­ing for rev­enue growth of 10-15 per cent per an­num.”

Ki­wiRail now has a clear five-year plan, he says. It in­cludes more com­muter ser­vices such as de­vel­op­ing the Auck­land-Hamil­ton route.

“I think that’s re­ally strong and we’re talk­ing with gov­ern­ment about that now and in­vest­ing in re­gions,” he says. “We’re do­ing a lot of work around tourism.”

Reidy hopes to see an Auck­land to Welling­ton tourism train run­ning ev­ery day and stop­ping in the Ruapehu dis­trict.

“Then of course we are mak­ing de­ci­sions about new ships for the Cook Strait. It’s big money.”

What’s needed too is longer-term fund­ing to lengthen the hori­zons for plan­ning, he says.

“We’ve only got two-year fund­ing. We used to have one. We re­ally need fiveyear rolling fund­ing . . . and in­vest­ment in the as­sets.”

The lo­co­mo­tives in the South Is­land are 48 years old, he notes by way of ex­am­ple.

“We need to in­vest in the core. Then you can start to ex­pand out into more re­gional ac­tiv­i­ties. It’s about mak­ing sure as­sets are fit for pur­pose and I think if the Gov­ern­ment can do that it will be a very strong busi­ness.”

Photo /Ja­son Ox­en­ham

“For New Zealand to grow, it needs a strong trans­port sys­tem,” says Peter Reidy.

Newspapers in English

Newspapers from New Zealand

© PressReader. All rights reserved.