This article first appeared in The Edge Financial Daily, on December 8, 2015.

KUALA LUMPUR: Loss-making Keretapi Tanah Melayu Bhd (KTMB), which has had relatively little success in turning itself around, is confident of reporting a small operating profit in its next financial year ending Dec 31, 2016 (FY16).

“We are looking to at least record profit at the operating level, but if we can break even, that is already good enough,” its president Sarbini Tijan told reporters yesterday, after announcing fare increases on selected routes for its intercity commuter service. “It will take some time, but I am confident that we can at least post a small operating profit as early as next year,” he said.

For FY15, Sarbini expects the national railway operator to narrow its net loss by almost half to RM55 million from over RM100 million in FY14. In FY13, KTMB saw its net loss reduced to RM128.23 million from RM238.44 million the previous year, while revenue grew 8% to RM491.82 million from RM454.67 million previously. “We are anticipating about RM600 million in revenue this year. But next year, with all the compensation and reimbursement from the government, and savings incurred from our cost-saving initiative, our revenue should jump to close to RM1 billion,” he said.

According to Sarbini, major profit drivers include the strong demand for its cargo business, cost-reduction initiatives, growth in passenger numbers, as well as compensation for uneconomic services that it will receive from the government. “Every year, the government subsidises us for losses incurred due to uneconomic services [serving the] east coast and southern states. To some extent, we are also seeking compensation for our electric train services, which are currently losing money.

“We are in discussion with the government to request for some RM200 million in compensation next year,” said Sarbini.

KTMB is also in discussion with the government to reimburse expenses that it has paid for on infrastructure works such as maintaining the railway tracks, bridges and tunnels.

“Bear in mind that our assets are held by Railway Assets Corp (RAC). We are just an operating company, but [the] truth is, we are still bearing all the maintenance costs relating to assets that we don’t even own. This defeats the purpose of being an asset-light company.

“And because of this, we are asking the government to reimburse all the infastructure work that we have done so far,” added Sarbini.

According to RAC’s annual report 2013, KTMB’s assets were worth RM31.23 billion.

As for its cost-saving initiatives that KTMB has taken, Sarbini said these include gradually eliminating the lease of air-conditioning service locomotives, doubling the train wagons to cater for greater capacity as well as using cleaner fuel that complies with the Euro-3 emission standard.Earlier, Sarbini announced that the government — via the Land Public Transport Commission (SPAD) — had approved KTMB’s new fare structure on two routes namely Tanjung Malim to Sungai Gadut, and Batu Caves to Port Klang, for its intercity commuter service. The new rate, which sees an increase by four sen, was effective last Wednesday.

“SPAD has allowed us to increase the fare from as early as this year, but we did not do so after taking into account the current cost of living. However, the four sen increase is still far below our operating cost,” he said.

Currently, KTMB’s total operating cost stands at 20 sen per km, of which the government subsidises five sen per km, while the remaining 15 sen is paid by the consumers.

“The difference of five sen is paid by the government. So far, we have received some RM60 million to account for the gap in matching the operating cost. We think that the increase is reasonable compared to other players such as Prasarana Malaysia Bhd and Express Rail Link Sdn Bhd,” he said, adding that the last price revision KTMB made was in 2003.

“At the end of the day, we have to balance between making small profit to ensure business sustainability and helping the rakyat to enjoy seamless connectivity,” Sarbini noted.