AusRAIL, Market Sectors

Positive results for Asciano despite market uncertainty

<span class="" id="parent-fieldname-description"> Asciano, parent company of Pacific National, has delivered a strong half yearly result despite what it sees as subdued volume growth and unpredictable market conditions in several of its businesses, including the loss of traffic to road on the North South corridor resulting from the Federal Government’s Carbon Scheme. </span> <p>The company reported a 74.4% increase in net profit after tax (NPAT) to $199.0m versus the previous corresponding period (pcp) (47.5% before material items) and a 12% increase in operating revenue (net of coal access) to $1.74bn.</p><p>The result was driven by significant volume growth in Pacific National (PN) Coal following the commencement of new contracts in Queensland and good organic volume growth from some contracts in New South Wales’ Hunter Valley, along with the realisation of a disposal profit on redundant land at Kooragang Island.</p><p>This was combined with very strong growth in Asciano’s Bulk &amp Automotive Port Services (BAPS) businesses as a result of new contracts, increased activity from the resources sector and record imported car volume growth in 2012.</p><p>Asciano CEO John Mullen said the company was particularly pleased with this result in light of the very soft first quarter market conditions across most of its businesses which made forecasting customer demand and responding with the appropriate level of resources extremely challenging.</p><p>“The result reflects the benefits of new contracts in PN Coal, BAPS and Terminals &amp Logistics, an ongoing focus on our business improvement program (BIP) which yielded benefits of $15.7m and a general focus on costs in light of the soft volume growth,” Mullens said. </p><p>The result was achieved at the same time as the completion of two strategic multi-year capital projects in PN Coal and the commencement of a new project which will see the container terminal at Port Botany expanded, redeveloped and fully automated. These projects are all expected to deliver improved customer performance and a significant lift in the efficiency, productivity and competitiveness of Asciano’s operations which it believes will drive strong returns.</p><p><strong>PN Coal</strong></p><p>PN Coal reported a 28.3% increase in total revenue (net of access) on pcp to $422.8m driven by an 18.8% increase in NTK’s reflecting the full period impact of a number of contracts that have commenced over the last twelve months in Queensland. Total tonnage moved rose 14.1% to 67.9m tones.<br />Tonnage hauled in Queensland increased 55.3% over the pcp and NTK’s increased 48.2% on&nbsppcp.</p><p>Following a relatively weak first quarter in Queensland, volumes picked up in the second quarter reflecting an improvement in export demand. While the six month performance was strong relative to the prior period it was below contractual expectations.</p><p>The result includes $21.5m in proceeds from the disposal of land at Kooragang Island in Newcastle. The facility was surplus to PN Coal’s requirements following the completion of the new maintenance and provisioning centre at Greta in the Hunter Valley.</p><p>The sale completes PN Coal’s transition to Greta and offsets to an extent the significant capital cost associated with the development of the facility over the last two years.</p><p>Reported EBIT grew 49.8% to $150.4m with underlying growth of 28.4% (excluding the $21.5m profit on the Kooragang Island land sale). </p><p><strong>PN Rail</strong></p><p>“PN Rail had a very challenging six months reflecting the soft economic conditions in Australia at the current time and the variability in export grain volumes. Total revenue increased 5.3% versus pcp to $686.9m driven by a 0.6% increase in Intermodal NTK’s and a 7.7% increase in Bulk Rail NTK’s,” Mullen said.</p><p>Both intermodal TEUs carried and bulk tones hauled were down on the pcp by 2.3% and 3.1% respectively, although NTKs for both segments were slightly up.</p><p>“Intermodal volumes were strong on the east-west route and in our Queensland business however the north-south route was soft reflecting we believe a number of issues including substitution to road given the additional cost competitive advantage road has over rail at the current time following the introduction of the Carbon Scheme and the increased transit times associated with track work on the Melbourne – Sydney leg,” he said.</p><p>Export grain volumes were significantly lower than forecast however some recovery is expected in FY13 H2. Costs associated with the under-utilisation of committed capacity, in particular in Bulk Rail, were carried in the period in anticipation of a recovery in FY13 H2. </p><p><strong>Outlook</strong></p><p>Based on the first six weeks of trading for the FY13 H2, the contribution from new contracts and current customer commitments, Asciano again expects to report revenue and EBIT for the half above the pcp, continuing the strong revenue and EBIT growth track record consistently delivered by the business over the past eighteen months. The result will be dependent on no further material deterioration in the outlook for the domestic and global economy and no changes to current customer commitments.</p><p>Mullen said the company expects the strong underlying performance of both PN Coal and BAPS to continue in the second half driven by the impact of new contracts, generally stronger regional port activity and the contribution from C3 Limited.</p><p>“We expect an improved second half from PN Rail on the back of stronger export grain volumes,” he said.</p>