Freight Rail, Workforce, Certification & Training

Aurizon doubles profit despite declining revenue

Aurizon coal train. Photo: Aurizon

Major rail operator Aurizon has announced a $604 million net profit after tax, despite a 1% decline in revenues in the 2014/15 financial year.

Aurizon announced $604 million as both its underlying, and its statutory NPAT on Monday, August 17, indicating it was not impaired or assisted by any significant, one-off transactions during the financial period.

The NPAT figure was up 15% on last year’s underlying NPAT figure, and up 139% on last year’s statutory figure.

This was despite a 1% decline in revenue, to $3.78 billion in 2014/15.

Earnings before interest and tax (EBIT) was $970 million, up 14% from last year’s underlying figure, and 109% from last year’s statutory figure.

When all was said and done, the ASX-listed business recorded 28.4 cents in earnings per share in 2014/15. It handed out a final dividend (30% franked) of 13.9 cents per share, up 64% from the dividend handed out at the same time last year.

The impressive increase in earnings despite a slight decrease in revenue helped the company achieve its operating ratio goal of 75%, managing director and chief executive Lance Hockridge said.

“Today Aurizon has reported the achievement of its core financial target, the 75% operating ratio by FY15,” he said on Monday.

“Since IPO [the company was floated on the stock exchange in 2010] we have delivered a strong improvement in our profit margin, on far lower rail volumes and revenue than initially forecast, through a disciplined program of cost reduction and productivity improvements.”

Hockridge said the company has delivered cumulative transformation benefits valued at more than a quarter of a billion dollars over the past two years.

“We’ve hauled 6% more in above rail tonnages with 13% less people and 17% less locomotives, and delivered major growth projects on time and on budget,” he said.

The recent completion of a lengthy set of enterprise bargaining agreement negotiations between Aurizon and several major unions was another positive step going forward, the chief executive explained.

“The catalyst for the next phase of transformation in the Company is new enterprise agreements covering employees in Queensland, which will provide us with productivity enhancements, operational flexibility and cost reductions,” he said.

“After two years of protracted negotiations, we’re pleased to be moving towards modern workplace agreements across our national operations.”

The new agreements should be in place within weeks, following rubber-stamp approval from Fair Work Commission, which is expected soon.

Hockridge said the Queensland-based operator will continue to assess opportunities to diversify and profitably grow the business.

“We understand the current market challenges but likewise we’re committed to a strategy of transformation and long-term growth,” he said.

The company has warned its revenue in the 2015/16 financial year will be impacted by around $200 million due to a number of factors, including a reduction in freight revenues due to smaller government contracts, and sale of CRT Industrial to Qube at the end of last year.

But the company is looking to find more savings through cost reduction in the new financial year.

“We are committed to these challenging financial targets despite the subdued market and tonnage outlook,” Hockridge said.

“Productivity improvements and cost reductions will underpin continuous improvement in our operations and for our customers, and also margin growth for the company.”