Asciano gains Qld impetus with Toll rail deal

Focus of growth strategy for subsidiary PN Rail turns to north-south freight despite soft market conditions

Asciano gains Qld impetus with Toll rail deal
Pacific National is gaining strength in Queensland

Asciano has added more bands to its strengthening ties with the nation’s biggest freight transport firms for rail and intermodal services.

The supply chain giant has already mapped out competitive areas for its Pacific National Rail (PN Rail) subsidiary, including east-west and north-south intermodal corridors.

Late last year, Asciano flagged its interest in pursuing Queensland and Western Australian rail opportunities.

Having already gained Toll, Linfox and K&S footprints in its new Perth Freight Terminal, a new deal with Toll appears to be making good on the Queensland part of the north-south strategic freight equation.

Under the deal, PN National gains a new Queensland rail services agreement to 2026 from February 1 and extended its interstate line haul agreement until 2022.

It will also see Toll place at least 90 per cent of its Queensland intrastate rail volumes on PN Rail services, Asciano says.

As part of the agreement, PN Rail will spend more than $70 million buying Toll’s intermodal rail terminals at Cairns, Townsville, Mackay, Rockhampton and Brisbane plus ancillary equipment, and will offer employment to approximately 60 Toll staff.

"The new interstate line haul agreement to 2022 with underlying volume commitments extends our successful long term relationship with Toll which has, in recent years, encompassed the development by Toll of a facility at PN Rail’s Perth Freight Terminal in Kewdale," PN Rail Director Angus McKay says.

Asciano CEO John Mullen highlighted the value of bringing more competition to the Queensland market PN Rail contests with QR in the face of tough eastern-state market conditions.

"The contracts … cement our relationship with Toll underpinning PN Rail’s interstate intermodal business while also delivering the opportunity to expand its current activities in the Queensland market over the medium term," Mullen says.

"While the intermodal business remains difficult at the moment due to the soft domestic economic conditions we continue to believe that we can drive growth in the business over the longer term through improvement in the efficiency, performance and productivity of our rail service offering.

"We reiterate the guidance given at the release of our FY14 first quarter results and the 2013 AGM that we expect PN Rail to report a FY14 EBIT result in the order of 5 per cent lower than the previous corresponding period reflecting the tough market conditions."

Toll sees the deal as a financial plus while providing more than a decade of rail freight stability for northern Queensland customers especially.

"The deal allows us to continue to provide Toll Intermodal’s customers’ with long-term access to quality rail infrastructure and significantly enhances the operational flexibility of our North Queensland business," Group Managing Director Brian Kruger says.

"It also reduces capital employed in this part of the business, which will result in an improvement in our return on invested capital."

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