Rail firm’s full year result to suffer from infrastructure damage and disruption
Multimodal freight and rail firm Aurizon predicts some sheen will be taken off it financial performance due to cyclone Marcia damage and industrial disputes.
Earnings before interest and tax (EBIT) are to be $14-$16 million less for the network business due to lost access revenue from reduced railings infrastructure repair costs, while the hit to above-rail business, including coal and intermodal services is $10-$12 million.
“Aurizon will be working closely with customers and supply chain partners over the remainder of the financial year to recover lost volumes through additional services,” the company says.
And industrial action by the Rail Tram & Bus Union (RTBU) and the Australian Federal Union of Locomotive Employees (AFULE) was likely to cost $2 million.
The bad news follows the group’s stellar first half results which saw net profits rise 188 per cent to $308 million from $107 million in the previous first half, though revenues were flat at $1.97 billion.
“In this subdued, low-growth economic environment, we’ve been relentless on cost reduction and productivity improvement,” CEO Lance Hockridge says.
“Our transformation program is helping us achieve solid earnings growth when overall market demand and revenue are relatively flat”.
The company says its intermodal freight integration has morphed into an Aurizon Operations function and that productivity gains include reducing Sydney-Perth transit timed from five to three days, added a sixth Melbourne-Brisbane service and delivered $93 million in benefits from its ‘transformation’ initiative.
That arm is looking at options to extend or renew regional freight and livestock transport services contracts that expire on June 30 and December 31 respectively.
On the Moorebank project of which it has a one-third share with Qube, Hockridge revealed that partners expect more than $1 billion will be spent over the next 12 year, with the burden share proportionately.
On freight generally, which saw revenue fall 10 per cent from $83.3 million to $74.9 million but tonnes hauled rise 1 per cent, he reiterated that management’s focus would be on integrating it with the intermodal arm.
“In the intermodal space, let there be no doubt this, from a total market volume position, is a challenged part of our business, as it is for others,” Hockridge says.
“That doesn’t mean, by any stretch of the imagination, that we have or will wave a white flag.
“We’ve continued to work assiduously with our customers, both existing and prospective, to look for opportunity particularly to build the pie, on the back of the kind of value equation that I’ve just described to our customers to be able to take advantage of every tonne of volume that is available for us out there.”
The company identified $57m in group operational savings:
- $27m in labour productivity – reflects a 5 per cent reduction in average FTEs driven primarily by productivity improvements in footplate hours, removal of deployment inefficiencies, progressive depot consolidation for maintenance and Intermodal, starting workshop labour reform and corridor integrated operating plan (IOP) initiatives such as North West corridor
- $25m in fleet productivity – IOP and improved operational practices driving a reduction in active fleet requirements with savings in ownership and maintenance costs
- $3m in fuel efficiency – due to a 2 per cent improvement in fuel consumption rates, driven by improvements in gross train weights, rationalisation of older, less fuel efficient fleet and enablement of fuel technology solutions
- $2m in other initiatives including lower consumable spend resulting from a review of Intermodal depots