Atlas contract negotiation to hit bottom line as review details emerge
McAleese Group has returned to share trading on the news that major client Atlas Iron will keep operations going at its Pilbara mines.
The haulage firm confirms it will get less from its Atlas contract following a renegotiation of terms needed to make mine production sustainable.
“As announced by Atlas, the parties are now working to finalise commercial terms, which include a lower base haulage rate with profit share dependent on [Australian dollar] iron ore price,” McAleese says.
The outcome will affect the company’s financial outlook.
Earnings before interest, tax, depreciation and amortisation (EBITDA) are now forecast at $70 million, down from February’s $85-90 million, due to the lower rate and a “weaker trading environment”.
That includes “challenging” conditions facing the specialised transport division, particularly on the national east-west corridor.
Against that, the energy transport division’s outlook is brighter, “reflecting significant investment in the fleet and safety systems and processes”.
Debt is expected to be $160-$165 million, including non-core asset sales of $10 million due before July 1.
Meanwhile, McAleese has become a customer of two teams of financial experts looking into aspects of its business.
Experienced transport company turnaround firm 333 Group – the outfit that reformed liquids transporter McColl’s and at least one other – is reviewing its performance related in the resources and infrastructure sectors.
“This will include debt reductions, profitability improvement and strategic options for the broader group,” McAleese says.
And industry-focused accountancy Ferrier Hodgson has reported on the operations and balance sheet related to the company’s November investment in Heavy Haulage Australia (HHA), which has gained $4 million in McAleese loans so far this calendar year.
“HHA and McAleese Group remain in discussion with the financiers to HHA regarding the terms of a financial and operating restructure,” the parent firm says.
“In light of the circumstances, the company is reviewing the carrying value of loans extended to HHA and expects a non-cash impairment to be reflected in the FY2015 accounts.”