Fruits of transformational period expected to come later rather than sooner
Qube’s relentless profit march has faltered with a 5 per cent net fall from $85.9 million to $82 million.
Though casting the financial performance as “reasonable” in a “challenging operating environment”, the company’s underlying net profit fall was worse, at 18 per cent.
Revenues were also down, 9 per cent, form $1.46 billion to $1.33 billion, in what was a momentous financial year.
Responsibility was sheeted to the ports and bulk division, “reflecting the full year impact of the cessation or restructuring of four major contracts that occurred in the second half of FY15” and the entitlement offer to fund the Patrick container terminals buy.
There was also an impairment of Qube’s investment in Northern Stevedoring Services (NSS) of $22.8 million.
However, the company will be looking forward to longer term outcomes from the purchase of Patrick finalised last Thursday; 50 per cent of Australian Amalgamated Terminals (AAT), and the agreement to acquire Aurizon’s 33 per cent interest in Moorebank, giving Qube full ownership.
After a dip this financial year, the earnings from Moorebank “are expected to progressively increase over the medium term as the new warehousing is leased and the rail terminals become operational”.
But this financial year is expected to be much the same as last year.
Earnings before interest, tax, depreciation and amortisation (EBITDA) from the logistics division increased 6.7 per cent despite revenue being around 3.5 per cent lower.
The margin improvement reflected operational improvements and a focus on cost reductions and asset utilisation including the consolidation of activities previously undertaken at Somerton to the Victoria Dock facility.
The integration of the CRT rail service acquisition was ahead of expectations and helped drive the margin improvement.
There was some weakness in Qube’s rail activities due to the New South Wales drought and the delayed start of the Quattro Grain facility and the start of the rail contracts Qube with grain traders in the Quattro Grain joint venture.
The ports and bulk division saw underlying revenue and EBITDA were down 13.9 per cent and 26.7 per cent.
There were strong volumes from activities including automotive stevedoring, forestry marshalling and bulk stevedoring.
This was offset by the reduced oil and gas related activity as well as the mothballing of a mine by one of Qube’s largest customers.
With improved prospects for the Utah Point facility due to the more positive outlook for the iron ore price and Qube’s customer base at the facility, it has reversed the previous impairment of the Utah Point facility of $17.7 million in its statutory results.
Associate firms had mixed results with a strong contribution from AAT, reflecting continued growth in motor vehicle imports, and Prixcar, reflecting the profit on sale of a property offsetting weaker operational performance following the loss of its major customer during the year, and a weaker result from NSS, reflecting market conditions in Townsville and Gladstone and weaker environment for new projects and contracts in its markets.
Costs were contained quite well, with fuel, direct transport and logistics costs down from $376.5 million to $322.9 million and oil and electricity down from $106.1 million to $75.7 million, though repairs and maintenance edged up from $83 million to $85.4 million.