Grain haulage, coal constraints drive down Asciano profits

By: Jason Whittaker

Embattled ports and rail group Asciano has taken a more than $70 million net-loss hit, but the company says coal

Embattled ports and rail group Asciano has taken a more than $70 million net-loss hit, but the company says coal contracts in Queensland will boost profits in the future.

The parent company of stevedore Patrick and rail operator Pacific National has faced investors and analysts in Melbourne with the $71 million loss, which it says reflects special items relating to the demerger from Toll Holdings and the restructuring of the group's loss-making grain business.

Revenue from continuing businesses for the period ended December 31 increased by 8.3 percent while underlying earnings before interest, tax, depreciation and amortisation increased by 21 percent.

"The growth in underlying earnings and the associated improvement in margins reflect a strong half-year for Asciano," Managing Director and CEO Mark Rowsthorn says.

Rowsthorn blames capacity constraints in the Hunter Valley coal chain for losses in Pacific National's bulk division.

"In the short term, addressing the capacity constraints in the Hunter Valley coal supply chain, and completing the restructure of the Pacific National rural rail business remain high priorities for Asciano," he says.

The grain operations, which Rowsthorn says is losing about $3 million a month, was also further hit by drought. The company has commenced the downsizing program which could lead to a sale or closure.

"While discussions continue with the grain industry, in the absence of volume risk being mitigated through the introduction of take-or-pay contracts, Asciano will close the business," he says.

But he says Pacific National is close to an agreement on new coal carrying contracts in Queensland with two customers. Equipment has been purchased to serve the contracts, which will require up to 10 train sets.

Pacific National's intermodal business enjoyed solid growth on the back of record volumes and revenues from the Express business.

Patrick traded well during the period, Rowsthorn says, with robust demand underpinning the container ports business. Patrick's auto, bulk and general ports division has also benefited from strong vehicle and steel volumes and ongoing efficiency improvements, he says.

"In the medium to longer term, we have a clear strategy in place to drive increased returns for security-holders, focus on core business, leverage our operating capabilities into growth opportunities, and to optimise our capital structure," he says.

"Our diverse business base, and particularly our exposure to growing commodity exports, containerised and motor vehicle imports, and domestic freight, should see Asciano continue to generate organic EBITDA growth in the range of 10 percent to 15 percent per annum over the longer term."

The company still holds a small stake in logistics group Brambles after an aborted takeover plan. Rowsthorn told journalists he doesn't regret the purchase and remains hopeful of recovering the debt.

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