Freight Rail

Cost cutting pays off for Pacific National

Pacific National has reported a substantial increase in earnings despite declining revenue in 2014/15, becoming another rail operator to benefit from considerable cost cutting measures over the past 12 months.

Aurizon, Pacific National’s key competitor in the rail space, announced on Monday it had lifted earnings before interest and tax (EBIT) by 14%, despite a 1% drop in revenue in 2014/15.

Pacific National followed that lead on Tuesday, announcing it had recorded a 2.3% decline in revenue, to $2.43 billion, but had increased EBIT by 16.6% to $597 million.

Pacific National, the rail division of ASX-listed business Asciano, helped its parent company to a statutory net profit after tax (NPAT) of $359.6 million, up 41.4% year-on-year. Aurizon’s statutory NPAT was $604 million, up 139%.

Both rail operators are dealing with tough conditions for their major clients: coal miners and exporters. But both companies cited cost cutting programs as the key to the successful profit growth.

“The result reflects a very strong focus on [Pacific National’s] business improvement program which generated $105.9m in benefits across the division as well as general cost reduction programs in light of soft conditions in some parts of the business,” Asciano boss John Mullen reflected.

“[Pacific National’s earnings growth] was an extremely strong result given the negative impact of severe weather in NSW on the coal haulage and intermodal business in April/May estimated at $12.7 million,” he added.

Mullen’s counterpart at Aurizon, chief executive Lance Hockridge, indicated the Queensland-based operator is on the same track.

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

“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.”