Railway company question

[viciam]

Hi all,

I'm having a look at a Chinese Rail company called Guangshen Rail. In there annual report it says the following:


Prior to 2006, we recorded the aggregate of the passengers arriving at and departing from our railway stations as total passengers.Beginning from the year ended December 31, 2006, we began recording only those passengers departing from our railway stations as total passengers. To conform to the current year presentation, we have adjusted the numbers of total passengers for each of the years ended December 31, 2004 and 2005 to only include passengers departing from our railway stations.

My question is why would they do this? What are the advantages and disadvantages of recording only departing passengers? Is it just a more conservative figure? Or are they trying to push the Revenue per passenger figure up? Or is it a more realistic figure meaning that the company only makes money from Departing passengers?

Any help would be useful.

 

[burglar]

... My question is why would they do this? ...

Any passenger departing, but not arriving, would possibly be dead.
Or more probably, in transit.
Not a statistically significant metric, I would have thought!!

 

[Smurf1976]

Assuming they collect fares from passengers before they physically get on the train, or have some electronic system on board to do it at the time of boarding, then it would make perfectly good sense to count passenger numbers and revenue in the same way.

It would only be logical to count them upon arrival if that's when they pay for the journey. There are situations where this does happen with rail travel, you pay upon arrival, but you still only pay once.

 

[viciam]

Strange that they should report the passenger figures recorded as "departures and arrivals" for 10 years than suddenly change to departures only.

That aside what you have mentioned makes sense.

 

[viciam]

For the same company there is a figure reported as Revenue per tonne-kilometer.

Does this figure tell me how much revenue the company generated from every tonne they moved every kilometer?

I had a look on Google but some very vague definitons

 

[burglar]

... generated from every tonne they moved every kilometer? ...

YES! Railways have costs associated with Gross Tonne Kilometres eg track maintenance costs.

There is also fuel costs per Gross Tonne Kilometre.

 

[viciam]

YES! Railways have costs associated with Gross Tonne Kilometres eg track maintenance costs.

There is also fuel costs per Gross Tonne Kilometre.

Cheers,

The same company acquired another in 2007 which extended its rail coverage from 152KM to 481.2KM. All the reporting of revenue per Tonne-KM up until 2006 had been around the 0.25RMB figure. Then in 2007 it decreased to 0.09RM revenue per Tonne-KM and has been at 0.09 since.

I'm not sure what to make of this. As a business you'd want that figure to go up right?

OR

Has the decrease in revenue per tonne-KM been offset by the increase of the total kilometres now covered by the company since the acquisition. Since the company since 2007 is shifting more freight at more distance.

I suppose one way to look at it is if a tonne moved the entire length of the network it works out better for the company. 0.25 x 152KM = 38 where as 0.09 x 481.2KM = 43.3. So in essence the capacity of the company to make more money has been increased due to the acquisition hence increase in total KM under the company regardless of the decrease in revenue per tonne-KM.

A little confused on how to interpret this whole situation

 

[burglar]

... how to interpret this whole situation

The length of the network has somewhat tripled.
Yet you know nothing about the additional network.

Is it passenger, freight or mixed. Is it high or low maintenance.
Many other factors!!

What's important?

I would suggest year-on-year improvement of major metrics!

 

[Smurf1976]

So far as freight is concerned, Tonne KM is basically a measurement of how much "work" the railway is doing. A combination of how much stuff they are moving and how far they are moving it.

Just like tonnes of ore mined is a measure of a mining company's activity levels and the volume of cars sold is a measure of a car company's business. In other words, it's turnover in a physical (as distinct from financial) sense. It's like saying how much beer a pub sold last night without asking how much they charged for it or what their costs of doing business (staff, alcohol, other supplies etc) were.

Whether they make a profit from this or not is an entirely different question, it's just a measurement of how much business they are doing in a physical sense.

 

[burglar]

For the same company there is a figure reported as Revenue per tonne-kilometer.

Does this figure tell me how much revenue the company generated from every tonne they moved every kilometer?

I had a look on Google but some very vague definitons

This question makes more sense if you meant Revenue tonne-kilometer ...
(as opposed to Revenue per tonne-kilometer.)

Then a Revenue Tonne is a tonne moved for revenue.
i.e. cargo, including packaging.

 

[burglar]

How come they are state-owned and you can also buy shares in them?

 

[viciam]

How come they are state-owned and you can also buy shares in them?

Its listed on the NYSE as well as Shanghai Stock exchange. You sure you're looking at the right one? There's a few Chinese Rail companies with similar sounding names.

So basically the figure dropped to 0.09 after 2007 due to the addition of more kilometres of rail now owned by the company? Much like a share dilution as an example?

 

[burglar]

Its listed on the NYSE as well as Shanghai Stock exchange. You sure you're looking at the right one? There's a few Chinese Rail companies with similar sounding names.

So basically the figure dropped to 0.09 after 2007 due to the addition of more kilometres of rail now owned by the company? Much like a share dilution as an example?

Sounds like comparing apples and oranges.

 

[viciam]

I found the answer in the 2008 annual report

Revenues per tonne-kilometer is calculated by dividing total freight revenue by total tonne-kilometers. Management believes that revenues per tonne-kilometer is a useful measure for assessing the revenue levels of our freight transportation business. The decrease in revenues per tonne-kilometer in 2007 and 2008 was primarily due to our acquisition of the railway transportation business between Guangzhou and Pingshi in 2007, whose freight transportation business had lower tariffs than that of the Guangzhou-Shenzhen Railwaywe operated before 2007

 

[burglar]

... primarily due to our acquisition of the railway transportation business ...

Why would they have acquired a business which had lower tariffs?
There may have been synergies or economies of scale.
Or a great price considering the assets.
Regardless of the reasons, it should show in the major ratios in the balance sheet.
Is the company showing improved profitability year-on-year?

... You sure you're looking at the right one? ...

I read in wiki and elsewhere, it is a state owned corporation.