The Rift Valley Railways (RVR) has broken even in the six months to June, aided by heavy investments in wagons and rehabilitation of trucks, a key shareholder has said.
TransCentury, which has a 34 per cent stake in RVR, said the rail firm is on course to post its first profit this year following years of losses.
The company in June said it had built 73km of new railway track between Mombasa and Nairobi at Sh1.7 billion and the upgrade had cut cargo delivery time between the two counties by six hours since the stretch had been responsible for 60 per cent of disruptions.
This is part of the overhaul of the dilapidated track between Mombasa and Uganda and would see the rebuilding of 360km of damaged sections, repair of wagons and locomotives through a Sh13.9 billion ($164 million) debt.
“We expect that with continued investments, RVR will for the first time achieve profitable operations going forward to start to contribute towards group earnings,” said TransCentury in a statement.
“The sustained capital investments over the past 18 months have resulted in the business turning around and achieving break-even in half one 2013.”
This has raised prospects that it will pay its maiden dividends to a shareholder that includes Egypt’s PE Citadel (51 per cent) and Uganda’s Bomi Holdings (15 per cent) in the short-term.
RVR won a 25-year contract to run the 2,352km Kenya-Uganda railway in November 2006 on the cargo business and a five-year contract for the passenger unit whose tenure was extended by months in 2008.
But the firm has failed to live up to expectations of the Kenyan and Ugandan governments seven years since it won the concession.
On the passenger business, the government has opted to offer the rail firm shorter one-year contracts, which gives the State a window to consider new operators should it be dissatisfied with RVR.
Kenya’s passenger rail services have not recorded any significant improvement. Official statistics show that the total kilometres covered by the operator dropped from 389 million in 2009 to 283 million in 2011 and 221 million last year.
Performance in the cargo business has also trailed that of the Mombasa port, which is expected to be the main source of RVR freight volumes.
Last year, trains hauled about 1.62 million metric tonnes of cargo while the Mombasa port handled 21.9 million metric tonnes of imports.
The rest of the freight was handled by trucks, which have been blamed for degrading roads, prompting the government to threaten a review of the concession.