Asciano unveils long-term Qld coal contracts


Asciano has announced long-term contracts with Rio Tinto and Xstrata to commence the haulage of coal exports by rail in Queensland from early 2010.

Asciano has announced today that it has executed long-term contracts with Rio Tinto Coal Australia and Xstrata Coal to commence the haulage of coal exports by rail in Queensland from early 2010.

The contracts are for an initial period of 10 years with further options to extend at the customers’ election. The initial contracted volumes are in excess of 14 million tonnes per annum, servicing both the Goonyella and Blackwater systems.

Asciano Managing Director and Chief Executive Mark Rowsthorn says: "After many months of negotiations securing these take or pay contracts is a significant milestone for Asciano.

"The contracts Asciano has entered into are unique and set a new benchmark for rail freight services in Australia. The partnership model agreed to by Pacific National and our customers, includes reciprocal performance indicators that will ensure coal throughput is optimised throughout the life of the contract."

Asciano will initially invest around $380 million in new rolling stock and infrastructure to service the contracted volumes. It will invest a further $200 million to provide additional capacity for future growth. This additional capacity will be used to secure additional volumes with other coal companies, accommodate growing volumes from its existing customers, and to service spot markets in the region.

"This type of investment is perfect for Asciano as it launches Pacific National into a market that is experiencing continuing high levels of growth. Providing services in a rapidly-expanding export supply chain that is essential to Australia’s economy is a unique opportunity," Rowsthorn says.

"Queensland coal exports are expected to grow from 185mt per annum currently to over 300mt per annum by 2015 and 380mt per annum by 2020. By securing a presence in this lucrative market Pacific National will have the opportunity to leverage our unique operating capability, underpinned by brand new equipment, a flexible workforce and over 20 years of experience in the Hunter Valley, into a range of new growth opportunities."

This new business is expected to deliver strong operating cashflows on baseline volumes when fully operational.

Pacific National has also announced that it has secured a five-year agreement with Manildra for the haulage of all its commodities moved by rail.

The agreement includes an allocation of eight train sets that will service Manildra’s facilities at Manildra, Gunnedah and Narrandera in New South Wales.

Manildra expects its rail haulage needs will exceed 2 million tonnes per annum within the next few years.

The agreement includes the provision of three existing contracted services and five new services with revised pricing and contracts. The new conditions are aligned with the recently agreed grain haulage contract with GrainCorp and will further reduce Asciano’s exposure to drought conditions.

"Securing take or pay conditions with Manildra and GrainCorp and resolving our Broadacre commitments with the NSW Government completes Pacific National’s grain restructure and secures sustainable future earnings for this segment of the business," Rowsthorn says.

This announcements coincided with the release of Asciano’s 2008/09 results, which included a 5 percent lift in operating revenue to $2.927 billion and a 10.1 percent increase in earnings before interest, tax, depreciation and amortisation (EBITDA), before significant items, to $677.7 million.

Key operating highlights included:

  • The Patrick Container Ports business (excluding Portlink) achieved growth in container lifts of 9.4 percent, with a strong performance from all four of the terminals. This volume growth, combined with ongoing efficiency gains (all four terminals recording improved crane rates and dwell times) underpinned a 14.5 percent increase in EBITDA.

  • Patrick Auto, Bulk and General Ports achieved EBITDA growth of 25.7 percent. A strong performance in the AutoCare business together with an active cost-management program, offset slightly weaker bulk and general tonnes resulting from the continued weakness in drought affected agricultural commodities.

  • The Pacific National Intermodal business benefited from the combination of increased volumes, revised pricing structures and margin expansion to achieve an increase in EBITDA of 22.8 percent. The premium service Express business was particularly strong, achieving record volumes and revenue.

  • The Pacific National Bulk businesses achieved mixed results. Strong customer demand in the coal business was largely offset by continuing supply chain capacity constraints, while the grain business experienced a decline in volumes, revenue and earnings due to the ongoing impact of the drought. EBITDA growth in the coal and industrial businesses of 2.3 percent were more than offset by the weakness in the grain and general bulk businesses, resulting in overall EBITDA for the Bulk division being down by 4.9 percent.

Commenting on the full-year results, Rowsthorn says: "Asciano’s operating business units performed well overall during the year.

"The Patrick ports business continued to benefit from growth in imports, particularly for containerised goods and motor vehicles.

"Pacific National achieved very good operating results in the Intermodal business, whilst ongoing strong demand for coal was again hampered by ongoing infrastructure capacity constraints. Exports of rural commodities remained soft, due to the ongoing effects of the drought."

In respect of the outlook he says Asciano expects to continue to perform well in the 2008/09 financial year.

"For the Patrick business, port volumes are expected to remain robust. Whilst the record levels of volume growth seen over the past five years are unlikely to be repeated in the short term, continued growth in imports and ongoing efficiency gains within the business should see further solid earnings growth achieved in 2008/09.

"The Pacific National Intermodal business is expected to again grow strongly, with recent increases in fuel prices enhancing rail’s competitive position against road transport.

"The coal business will continue to benefit from strong demand and high coal prices and we expect to see capacity constraints in the Hunter Valley network ease during the coming 12 months. Finally, the successful restructuring of Asciano’s grain business during the year will see a substantial recovery in the profit contribution of this business in 2008/09."

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