Saturday 20th Apr, 2019

Aurizon to move on from QCA battle after 19pc profit dip

Coal wagons Aurizon. Photo: Aurizon
Photo: Aurizon

After fighting for the better part of a year with the Queensland Competition Authority over how much it should earn from the Central Queensland Coal Network, Aurizon looks ready to accept the authority’s latest terms.

Aurizon owns the CQCN track used by coal miners to reach export markets, but must conform to the access undertakings limiting its revenue to levels deemed fair by the QCA.

After a particularly unfavourable set of draft terms were announced by the QCA for the next undertaking, UT5, in December 2017, Aurizon spent the better part of 2018 challenging the authority in and out of court to secure better terms.

A final set of terms, released by the QCA in December 2018, was slightly more favourable for the rail operator, but still far from its ideals.

Aurizon has until February 18 to respond to the QCA’s final decision, but it would appear the operator is ready to accept the terms as the new norm.

The company, which is ASX-listed, applied the QCA’s latest revenue terms to its below rail business for its half-yearly financial reports released on Monday. It also conceded it will have to refund $61 million to customers as a result of the new access terms.

“Today’s financial year results reflect the headwinds highlighted in August 2018 at our full year reporting, as well as the impacts from the regulator’s final decision on the UT5 Access Undertaking,” managing director Andrew Harding said. “The regulator’s final decision … included a 6 per cent revenue uplift compared to the draft decision,” he noted. “This included increases in the maintenance allowance and the Weighted Average Cost of Capital.”

Harding said Aurizon is still working with its coal miner stakeholders to reach some other form of agreement. “While discussions are ongoing no agreement has been reached,” he said.

The 19 per cent dip in Aurizon’s net profit left it with $227 million in the first half of FY19. Earnings per share were 11.4 cents, down 18 per cent. Earnings before interest and tax (EBIT) were down 16 per cent, to $406 million. Revenue was down 7 per cent, to $1.46 billion.

Aurizon said its bulk business was impacted by the early closure of the Cliffs iron ore business in WA in June 2018, and in coal, volumes were impacted by supply chain constraints, weather events and protected industrial action.

“In addition, costs increased due to higher maintenance activities in bringing rollingstock back into service and in supporting future growth volumes,” the company said.

For the full FY19, Aurizon’s guidance for underlying EBIT remains between $390 million and $430 million. “This accounts for the weather-related events in North Queensland during January and February 2019 and the cessation of the Mt Gibson contract (end of mine life) in January 2019, but remains contingent on no other major weather impacts or changes to operating conditions occurring during 2HYFY2019,” the company said.

Aurizon’s above rail coal haulage volumes remain within the previously advised guidance of 215-225 million tonnes.

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