Asciano interim profits jump 5%, CEO resigns

Asciano announces interim numbers, acquisition thoughts, and CEO’s Telstra appointment

Asciano interim profits jump 5%, CEO resigns
Asciano CEO confirms profit rise and his exit.


Asciano has announced a $199.8 million net profit after tax (NPAT) in its interim results today, a 5.3 per cent increase for the six-month period up to December.

While the profit growth stemmed from strong Queensland coal volumes, the company’s revenue dropped 4.3 per cent to $1,863.4 million on the back of declines across a range of divisions.

Asciano CEO and managing director John Mullen says the "result is pleasing in light of the current business environment" as coal haulage increased 6.9 per cent and other bulk tonnes haulage increased 4.2 per cent.

However, these "gains were offset by flat or weaker volumes across other areas of the business, in particular those parts of the business exposed to the Western Australian economy and resources related activity," he says.

Asciano’s underlying earnings before interest and tax (EBIT) decreased 2.8 per cent to $380.3 million, courtesy of Pacific National’s 0.1 per cent drop to $290.9 million and Patrick’s 0.8 per cent drop to $116.7 million.

Pacific National’s bulk rail division was the sole team to see revenue growth, boosting coffers by 0.8 per cent, if unallocated numbers are excused.

Pacific National in total saw a 1.3 per cent decline in revenue, while Patrick saw a nine per cent drop – headlined by a 13 per cent decrease for the terminals and logistics arm.

Asciano says the troubles with Pacific National reflect declines in New South Wales and Victoria, and lower intermodal numbers.

However, coal haulage in Queensland and New South Wales grew 11.8 per cent and 3.2 per cent, respectively.

"The performance of both regions reflecting ongoing high rates of contracted haulage by our key customers," Mullen says.

"Intermodal revenue declined 4.7 per cent reflecting weakness in the key east-west route offset to an extent by improved volumes north-south."

For Patrick, Mullen says the numbers are the result of the joint venture with ACFS Port Logistics.

"Total revenue declined nine per cent over the pcp however stripping out the impact of the creation of the metropolitan logistics joint venture ACFS Port Logistics effective 1 August 2015, the division reported a decline in revenue of 1.8 per cent on the pcp to $655.4 million," he says.

"Volumes were impacted by the soft Western Australian economy, the downturn in resources projects generally and the impact of drought on some agricultural volumes."

In other expenses, Asciano says employee benefits declined 5.5 per cent on the back of a 10.5 per cent decline in full time employees, fuel costs declined with the changing diesel price, and repair and maintenance costs fell 7.9 per cent thanks to the renegotiation of contracts.

Rail charges jumped during the six months, primarily because of the increase in volume hauled in Queensland.

For shareholders, the interim dividend jumped from 8.25 cents a year ago to 13 cents in the second half of 2015.

The increase comes from a 234 per cent increase in cash flow, a result of Asciano’s 46.2 per cent decline in capital expenditure, which decreased to $142.3 million.

"As we foreshadowed, capital expenditure declined materially as projects associated with business reinvestment in the last few years have been completed," Mullen says.

Which means the Asciano CEO "now expects FY16 capital expenditure to be approximately $350m, down from the previous forecast range of $390-440m."


Bid update

In terms of the ongoing Qube and Brookfield battle for Asciano, the company says it has received letters from both companies in regards to the preliminary discussions unveiled yesterday.

Indicating that the proposal "is likely to be attractive to Asciano shareholders," Asciano says it "notes that the discussions are preliminary and a number of steps would need to occur prior to any binding proposal eventuating."

Should the deal fall through, Asciano says the board will continue to recommend the Qube Consortium Proposal unveiled earlier this month.


Mullen’s move to Telstra

While announcing its interim results, Asciano has confirmed its CEO and managing director John Mullen has been appointed as Telstra’s next chairman.

Succeeding Catherine Livingstone in the chairman role, Asciano will begin a hand-over period for Mullen.

"The Asciano Board supports John’s choice to accept this appointment," Asciano chairman Malcolm Broomhead says.

"Throughout his time as Asciano CEO and managing director, John has also been a director on the Telstra Board.

"He has also been chairman of Telstra’s Remuneration Committee and a member of the Nomination Committee.

"Transition into the Telstra chairman role will be managed through a progressive hand over, allowing for smooth transition once he is free from his current commitments."



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