Coal fuels Asciano profit growth

Asciano lifts pre-tax earnings by almost 8 percent on back of robust earnings growth from bulk operations and improving environment for non-bulk operations

Coal fuels Asciano profit growth
Coal fuels Asciano profit growth

February 24, 2010

Asciano Group lifted pre-tax earnings by almost 8 percent despite a slight fall in revenue in the six months ended December 31, 2009, bolstered by robust earnings growth from bulk operations and an improving environment for non-bulk operations.

Total revenue declined by 4.4 percent to $1.435 billion for the period, while earnings before interest, tax depreciation and amortisation (EBITDA) – and significant items – increased by 7.9 percent to $368.2 million.

Net profit after tax and significant items was $79.1 million, compared with a loss of $93.4 million in the previous corresponding period.

CEO and Managing Director Mark Rowsthorn says the strong earnings performance reflects three key factors.

Firstly, Asciano continued to see strong volume growth in coal haulage operations as it successfully commenced operations in Queensland to supplement continued growth in New South Wales volumes.

This volume growth offset continuing soft volumes in a number of its non-bulk operations, he says.

"Secondly, we continued to actively target cost reductions and efficiencies across all of the business units. As a result, we were able to achieve an overall reduction in operating expenses of 8 percent, well in excess of the 4.4 percent reduction in group revenue, resulting in a significant improvement in EBITDA margin," Rowsthorn says.

Thirdly, he says Asciano’s capital raising and restructuring of debt facilities resulted in a substantial decrease in interest costs, which flowed through to a sharp turnaround in net profit after tax.

The restructure of Asciano’s balance sheet means gearing is now around half the level it was 12 months ago. The company has no debt refinancing due until May 2012.

As a result, Rowsthorn says Asciano is now positioned as an "industrial supply chain company" with strong market positions, good growth prospects and a robust balance sheet.

"We now have all the elements required to focus on restoring returns to investors through sustainable value creation and strong long-term growth," he adds.

Asciano’s growth profile includes a pipeline of opportunities that exist in each of its businesses.

Within the coal division there is the continued push into the Queensland coal haulage market. This market is expected to double within the next five years and Asciano is keen to increase its footprint in this region.

"The positive trends we saw emerge in volumes during the December quarter give us some confidence that the worst of the recent global economic downturn is behind us.

"Whilst we may see some slowing of momentum in the coming months following the inventory rebuilding that occurred during the December quarter, the medium-term outlook for our business is more positive today than it has been for the past 18 months.

"Barring unforseen circumstances, Asciano now expects 2009/10 full-year EBITDA to be around the top end of the previous guidance range of $675 million to $700 million," he says.

Pacific National Coal

Coal remained the standout performer for Asciano, with revenue growth in excess of 20 percent reflecting a similar level of growth in volumes [measured as net tonne kilometres (NTKs)].

This comprised continued solid growth in Hunter Valley coal exports and strong demand for domestic coking coal and export coal in southern NSW, supplemented by the early commencement of coal haulage operations in Queensland.

Higher access charges and labour costs (reflecting volume growth) were partly offset by reduced fuel costs and active management of overheads, resulting in a significant improvement in operating margins.

Pacific National Intermodal

Intermodal achieved EBITDA growth of 6.2 percent despite a decline in revenue of 15.9 percent.

The reduction in revenue reflected a continued difficult operating environment, with total volumes (NTKs) declining by 8.3 percent.

This volume and revenue weakness was offset by significant cost savings in labour, maintenance, fuel and access expenses.

Intermodal also benefitted from some recovery in steel volumes during the December quarter (steel tonnes up 13 percent compared with the previous corresponding period.)

Patrick Container Ports

Reduced revenue in the container ports division was a reflection of reduced volumes, with total container lifts down by 4.2 percent for the year, together with a continued difficult operating environment for the port logistics business.

Sydney remained the strongest market with lifts up by 5 percent for the half. Brisbane lifts increased by 1 percent while Melbourne was down 13 percent and Fremantle down 14 percent.

The revenue losses were partly offset with cost savings (total operating expenses down 5 percent), however, divisional EBITDA and EBITDA margin both declined.

Some signs of stability in volumes emerged during the December quarter, with quarterly volumes down 1 percent, compared with a 7 percent decline during the September quarter.

Auto, Bulk and General

Results for the auto, bulk and general business were mixed, reflecting the diversity of the division’s operations.

Motor vehicle transport and storage volumes both declined for the half year. Improved motor vehicle transport volumes were experienced during the December quarter (up 4 percent, following a 20 percent decline in the September quarter) reflecting some improvement in new car sales for the second quarter.

Bulk port and general stevedoring volumes were lower, with steel, cars and bulk freight all weaker. Bulk rail volumes (NTKs) were up 8.9 percent, with stronger grain volumes offsetting a slight decline in industrial freight volumes.

Overall revenue for the division declined by 6.7 percent, resulting in an EBITDA decline of 11.9 percent.

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