Doug Ashbury
Northern News Services

NNSL (May 31/99) - RaiLink, the transportation company which owns the Mackenzie Northern line to Hay River, reports first- quarter performance below expectations.

"RaiLink's Mackenzie Northern property continues to experience difficulties in its ramp-up phase," Gordon Clanachan, RaiLink president and CEO, said in the company's first- quarter financial report.

Net income on the Mackenzie Northern line was $770,000 below expectations.

Less fuel oil was shipped because a warmer winter lowered demand and reduced mining activity were cited for the shortfall. A shorter shipping season due to late establishment of the Northern ice road network was also cited.

Grain shipments were also below target.

The first-quarter financial results also reflect $250,000 in unplanned expenditures for short-term leased locomotives and higher maintenance costs.

"Management believes that the lower than expected traffic numbers are a result of special circumstances and that adequate long-term revenue levels can be achieved," Clanachan said.

Despite the $770,000 shortfall on the Mackenzie Northern route -- which extends about 1,000 kilometres between Smith, Alta., and Hay River -- RaiLink made $844,000, or 10 cents a share, for the three months ended March 31.

The first-quarter profit is a 50 per cent increase over the $563,000, eight cents per share, made in first-quarter 1998.

The first-quarter results follow a fiscal 1998 profit of $2.7 million, up slightly from 1997's net income.

First-quarter operating income jumped 145 per cent to $1.7 million from $689,000 in the same frame a year earlier.

RaiLink operates about 3,900 kilometres of track in NWT, Alberta, Ontario, Quebec and New Brunswick.

The company acquired the Mackenzie Northern line from CN in 1998 for $25 million cash.

Newly-acquired operations take 12-18 months to get properties running at optimum levels, Clanachan, adds.

For the 1998 year, the Mackenzie Northern line's operating expense was nil. Revenue of $9.6 million equalled expenses, according to the company's annual report.