Aurizon profit up, flags lower shipments
Aurizon Holdings has flagged a reduction in coal haulage at its Queensland rail network after an unfavourable draft ruling by the Queensland competition regulator but has affirmed its guidance for full-year underlying earnings.
The rail freight operator has posted a first-half profit of $281.5 million, a 52 per cent jump from the previous corresponding period when its bottom line was weighed down by impairments and one-off items.
However, underlying earnings before interest and tax for the six months to December have come in five per cent lower at $485.3 million.
Chief executive Andrew Harding on Monday outlined the impact of a draft decision issued by the Queensland Competition Authority in December, which the company has called flawed and says contains fundamental errors.
"We estimate the net impact of initial changes could reduce system throughput by approximately 20 million tonnes annually," he said.
Under the draft decision, the regulator has allowed lower-than-expected earnings from the business over the five years to June 2021, and asked the company to lower its planned maintenance charges.
"Going forward, Aurizon will prioritise lowest-cost maintenance over (network) flexibility - with no trains passing, a process advocated by the QCA and its consultants," which would result in lower volumes, Mr Harding said.
The rail freight operator grew haulage tonnes in the coal business in the first half on the back of continuing strong demand for metallurgical and thermal coal, but said a competitive market was putting some pressure on contract prices.
In the bulk business, it has continued with cost reductions and operational reforms as part of its turnaround plan.
The network business posted a three per cent improvement in volumes for the half year.
Following a review of its freight business, Aurizon last year announced it would exit its entire intermodal container freight terminal business via a combination of closures and sales.
The company has already closed its inter-state intermodal business, at the end of 2017, and is targeting the sale of the Queensland Intermodal business and the Acacia Ridge Freight Terminal by June 2018.
The Australian Competition and Consumer Commission is reviewing the planned sale of Acacia Ridge, but Aurizon says it will shut down the intermodal terminal if the regulator does not approve a sale.
The company reaffirmed its expectation that full-year underlying earnings will be in the range of $900 to $960 million and declared a 50 per cent-franked interim dividend of 14 cents per share.
By 1423 AEDT, Aurizon shares were up 3.4 per cent at $4.755 in a weak Australian market.
AURIZON'S HALF-YEAR RESULTS
* Statutory net profit of $281.5m vs $185.8m year ago
* Revenue down 3pct to $1.565b
* Interim dividend of 14 cents, 50pct franked, from 13.6cps
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