Slow and steady wins the race for Asciano

Date: 23.02.2012

Port and rail operator Asciano reports double digit earnings across its three operating units, PN Coal, PN Rail and Patrick

By Anna Game-Lopata | February 23, 2012

Port and rail operator Asciano has reported double digit earnings across its three operating units, PN Coal, PN Rail and Patrick.

Delivering its results for the first half of the 2012 financial year, Asciano pointed to a 21.3 percent increase in profits, mainly as a result of new coal and other rail haulage contracts.

Overall, revenue increased 8.5 percent to $1.7 million, earnings before interest and tax (EBIT) increased 8.9 percent to 295 million and net profit increased 21.3 percent to $113.9 million.

New business
in the coal and rail haulage businesses continued to underpin the company’s recovery, driven by 15.9 percent revenue growth in PN Rail and 13.6 percent growth in PN Coal.

Stevedore Patrick also did okay, despite impediments caused by industrial action in the half, reporting an overall revenue growth of 5.6 percent.

Patrick's Container Terminals business achieved a 12.4 percent increase in operating revenue offset to an extent by declines in revenue in Ports & Stevedoring and Port Logistics.

This was despite the impact of industrial disputes with the Maritime Union of Australia (MUA)
along with higher labour and services costs, which the company estimates set Patrick back to the tune of $11.5 million.

Asciano Chief Executive John Mullen expects EBIT in the second half to be higher than in the first and to exceed the previous corresponding period.

"While soft economic conditions are expected to prevail for the remainder of the 2012 financial year, we believe there are a number of opportunities to grow all three businesses, both at the top line and at the EBIT level," he told shareholders.

Mullen says his follow-up to last year’s divisional consolidation, a management re-structure within Patrick in January, will position Terminals & Logistics, Ports & Stevedoring and Autocare more strategically within Asciano.

With the resignation of Patrick Director Paul Garaty, the position has been dumped. Rather, Alistair Field, formerly Divisional General Manager of Terminals and Logistics has taken on a newly created position, Director Terminals and Logistics.

Phil Tonks and Alex Milan retain their roles, respectively, of General Manager Ports & Stevedoring and General Manager Autocare.

"This structure will allow us to move forward and grasp the opportunities within all three Patrick businesses and ensure that the integration opportunities between these activities and our rail business is realised," Mullen says.

In addition, business improvement savings are on track to reach Asciano’s forecast $150 million in five years, with PN Rail contributing $7.7 million and Patrick delivering $5.6 million of the company’s total $17.2 million cost reductions in the half.

PN Coal roars
PN Coal reported a 13.6 percent increase in revenue, up from $290 to $329.6 million despite a 7.1 percent decline in tonnage kilometres (NTKs) to 9,642 million.

The company blames a number of factors for the decline in NTKs, including floods in Queensland, derailments in South Australia, the loss of its Peabody and contracted X-Rail rolling stock operation, declining performance at the Port Kembla Coal Terminal and ongoing coal chain congestion in the Hunter Valley.

PN Coal rose above the setbacks, winning significant new contracts including with Rio Tinto, Anglo America Australia and Middlemount Coal.

Strength to strength for PN Rail
Meanwhile PN Rail reported a 15 percent increase in revenue from $ 567.2 million to $652.5 million and EBITDA increased 12.percent to $150.4 million.

The commencement of a contract with the Foster's Group with volumes secured by Linfox and Toll in August 2011 is at the heart of the achievement, along with a ten percent increase in express services revenue.

PN Rail also secured a 64 percent increase in revenue from grain haulage, operating 13 export grain train sets over the six month period versus 11 train sets last corresponding half.

In addition the company nabbed a contract with Xstrata for magnetite which commenced its first train service in April 2011.

Over the last six months PN Rail has signed a number of new contracts including: export grain for the Emerald Group and Cargill and the provision of new regional services in NSW for both Linfox and Toll into Port Botany.

It has also finalised an agreement for the movement of 650k tonnes per annum of hot rolled coil steel from Port Kembla to Western Port for BlueScope Steel commencing in the 2013 financial year.

Patrick makes hay while the sun shines
Patrick reported a 5.6 percent increase in total revenue from $598 to $631.4 million, comprising a 17.5 percent increase in Container Terminals revenue,
offset by a 5 percent decline in Ports & Stevedoring and a 1.4 percent decline in Port Logistics.

Overall EBITDA increased 5.5 percent to $148.9 million on the prior year, driven by the additional volumes within the Container Terminals and Ports and Stevedoring businesses.

Meanwhile Autocare’s revenue increased 2.8 percent despite a reduction in volumes caused by the impact of the earthquake in Japan and the recent floods in Thailand which caused significant disruption to the automotive industry supply chain.

The underlying revenue growth in the Container Terminals business of 12.4 percent reflects an expanded contract with Maersk, additional services with China Australia Express and improved storage and refrigerated container volumes.

But the company says to some extent, the cessation of
its AAS services contract and lower subcontract volumes from DP World offset increasing volumes.

Container volumes and terminal operations over the period were also significantly impacted by reduced operational performance during the ongoing conflict with the MUA and $1.8 million in costs associated with the restructure of the BlueScope operations at Port Kembla.