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Profits fall but Aurizon hauls record coal volumes

2014-02-19

 

Aurizon has posted a fall in half year profit but the rail freight operator hauled record amounts of coal in January and February and expects to haul more coal this year than previously forecast.

   
Profits fall but Aurizon hauls record coal volumes

Courtesy Aurizon

By Jennifer Perry
 
Net profit for the six months to December 31 fell to $107.3m, a 39% slide from $176m in the first half of 2013.
 
One-off impairments that affected the company’s results, previously announced in December, include $147m on its rolling stock fleet, $50m on a strategic infrastructure projects review and $25m in the payment for voluntary redundancies.
 
Aurizon is reportedly shrinking its locomotive fleet by almost one third to 598 engines and its wagon fleet by 12% to 16,292 cars by financial year 2018.
 
In the six months to December 31, there were 262 voluntary redundancies which the company expects to deliver $28m in savings during financial year 2014 and $42m during the following full year.
 
Underlying net profit for the period was $263m, an 18% increase on the $222m for the previous corresponding period (pcp).
 
Revenue for the same period was $1.965bn, up 5% on the pcp’s $1.879bn.
 
Aurizon’s coal haulage business performed strongly with volumes growing 13% to 109.7 million tonnes (mt) in the same period – representing a record six month period for the company.
 
Queensland volumes were up 13% to 88.6mt while New South Wales volumes increased by 12% to 21.1mt.
 
There was a 3% increase in the coal haulage business’ revenue and a 3% reduction in operating costs, contributing to a 32% increase in underlying earnings before interest and taxation (EBIT) to $187m.
 
According to the company’s chief executive Lance Hockridge, the strong coal haulage volumes continued in January and February, therefore Aurizon’s expectations for the 2013/14 financial year have increased to between 207 and 212 mt, up from its previous forecast of between 200 and 205 million tonnes.
 
“This takes into account the impact of recent weather events in Queensland that resulted in coal tonnage losses of about 1.5 tonnes (with an estimated loss of about $5m in revenue as of 11 February), and is subject to no further material disruptions (outside normal expectations) from the wet season, nor industrial action,” Hockridge said.
 
Aurizon’s iron ore volumes for the period grew 42% to 15.0 mt and underlying EBIT increased 11% to $50m. 
 
Aurizon’s network business had a material increase in throughput to 107.6 mt, an increase of 20% on the pcp.
 
This represents the largest six month period in tonnage throughput across the Central Queensland Coal Network. 
 
Underlying EBIT for the network business reduced 2% to $217m due to lower revenue yield from fixed access revenues for the Central Queensland Coal Network.
 
The company’s freight business hauled 24.6 mt during the period, a decrease of 5% compared to the pcp.
 
Within freight, bulk volumes decreased 7% due to the end of Aurizon’s grain haulage contract with CBH in Western Australia in October 2012 and lower Queensland grain volumes this year. Offsetting this was a 14% increase in intermodal volumes largely due to new contracts which commenced this year.
 
Underlying EBIT for the freight business increased 300% to $20m.
 
Aurizon delivered $417m in capital investments for the period of which $215m was on growth projects including Queensland’s Wiggins Island Rail project, Hay Point expansion and Rolleston electrification, with the balance on sustaining capital expenditure.
 
December last year also saw government approval for the $150m Hexham train support facility in NSW’s Hunter Valley.
 
Outlook
Hockridge said the result reinforced the traction Aurizon’s transformational program is getting and reaffirmed that the company is on track to meet its operating ratio of 75% in financial year 2015.
 
“Aurizon is driving out costs and lifting productivity across operations in a persistently challenging economic environment where resource investment has moderated and general freight activity remains flat,” Hockridge said.
 
“Aurizon’s view on the medium to long term macroeconomic environment remains positive though short-term headwinds in the domestic economy continues to be challenging for many customers.
 
“We remain confident in the long term drivers of global demand for Australian resources, including coal and iron ore, based on continuing urbanisation and industrialisation of Asian economies.”
 
Hockridge acknowledged that there was substantial work ahead and some “industrial risk” as Aurizon finalises new enterprise agreements this year.