Freight Rail

Volumes, one-off costs cut Aurizon profit down 88%

Aurizon coal train. Photo: Aurizon

Market pressures and a significant transformation costs drove Queensland-based operator Aurizon’s net profit after tax down 88% in the 2015/16 financial year, the company announced.

Aurizon on August 15 announced statutory net profit after tax was down 88% to $72 million in 2015/16.

Statutory earnings before interest and tax were down 65% to $343 million.

Aurizon’s underlying figures – which take out one-off costs to better reflect the performance of the business – were slightly healthier, but still didn’t paint a pretty picture.

Underlying NPAT was down 16% to $510 million, while underlying EBIT was down 10% to $871 million.

Aurizon boss Lance Hockridge said the result came from a “challenging year for the company and our customers,” with volumes and revenue under pressure in
the above rail businesses, particularly in Freight.

“Transformation continues to be the major driver of earnings growth, with $131 million delivered this year, along with an uplift in EBIT from the below-rail Network business,” he said.

“We have increased confidence in our ability to deliver an additional $250 million in cost reductions and productivity improvements to take $380 million out of our cost base for the three years to FY18.

“If achieved, that would mean a reduction of more than $630 million in our cost base over a five-year period. (FY14 to FY18)

“A number of substantial initiatives have been recently commenced including a new regional model for Operations, improved alignment of train crew and maintenance workers to long term demand, the outsourcing of non-core maintenance activities, and the continued consolidation of corporate support functions.”

“With the Company’s capital expenditure requirements reducing over the next two years, an increase in free cash flow growth will enable us to continue to deliver distributions to shareholders, even in an environment of low earnings growth.”

Hockridge said the company did see a stabilisation in coal volumes in the
second half, with relatively resilient earnings for the year in a lower volume environment.

This was driven by an improvement in coal customers’ conditions, with just 10% of Aurizon’s coal customers operating at a cash negative, compared with around 25% in the middle of the financial year.

1 Comment

  1. It is a shame the this writer doesn’t explain what NPAT is and the meaning of EBIT – unless of course this is just a media release provided by Aurizon.