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Asciano sees profits soar in second quarter

Slow start to the financial year yields to swift rise in financial performance as contracts kick in

February 19, 2013

Asciano has bounced back from a “soft” first quarter to record a 74 percent rise in net profit to $199.9 million for the first half of the financial year.

The rise came despite revenues edging up only 8.3 percent to $1.82 billion.

The result was driven by volume growth in Pacific National (PN) Coal after the start of new Queensland contracts in and organic volume growth from some Hunter Valley contracts along with the realisation of a disposal profit on the now redundant land at Kooragang Island.

This had combined with strong growth in the Bulk & Automotive Port Services (BAPS) businesses, especially Autocare, as a result of new contracts, increased activity from the resources sector and record imported car volume growth last year.

BAPS revenues rose 33.6 percent on the previous first half to $307 million.

“The result reflects the benefits of new contracts in PN Coal, BAPS and Terminals & 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,” Managing Director and CEO John Mullen says.

“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 our 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 our operations which we believe will drive strong returns on the investment made.”

The good news was leavened somewhat by PN Rail’s struggles with “soft economic conditions in Australia at the current time and the variability in export grain volumes”, which saw revenue growth rise only 5.3 percent on the previous first half to $687 million.

“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,” Mullen says.

PN Rail faced a significant decline in intermodal volumes for locally manufactured vehicles and intermodal volumes in December were down generally “following service outages associated with track possessions in both Melbourne and Ulan”.

Steel revenue was flat for the period despite a 5.9 percent increase in volumes reflecting a change in product mix and destination. Volume performance was directly associated with the movement of hot rolled coil from Port Kembla to Western Port Bay.

Rail volumes into Adelaide from East Swanson Dock declined as shipping services were diverted directly to Adelaide.

Mullen notes that the Terminals & Logistics arm had seen productivity growth due mostly to new cranes and, despite revenues falling 3.5 percent on the previous first half to $388 million, he forecasts great things for its Sydney operation.

“Following a very difficult trading period in late August and September at Port Botany, where the company incurred significant costs and lost volume associated with poor productivity, I am pleased to say that productivity has improved dramatically, assisted by new crane equipment at all four terminals, driving a significant improvement in berthing window performance,” he says.

“While the profitability of Port Botany still remains 50 percent below East Swanson Dock, its performance metrics are now moving strongly in the right direction and we believe we can drive further improvements over the next 12 months.”

Looking forward, the company expects the second half to better than last year’s second half, with PN Coal and BAPS continuing to ride high and no slippage likely to Terminals & Logistics as Port Botany’s redevelopment continues.

It notes that K&S was already at its Perth customer precinct, with Toll to start there soon, and that Linfox had signed up to an extended five-year intermodal rail freight services deal that started on January 1.

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