Impairments mar Aurizon market update

Forecast in range but Aquila and rolling stock issues are messy

Impairments mar Aurizon market update
Aurizon’s coal mining investment has cost it dear.


Rail and intermodal operator Aurizon expects its full financial year gross earnings to be $871 million, within its guidance range of $845-$885 million.

It expects intermodal throughput to be 372,600 TEU of containers, up from 372,000 last financial year.

The company has taken another financial hit from its troubled Aquila Resources investment, recognising a further $73 million in impairment.

"This follows a deferral in the timing of the development of Aquila’s Queensland coal assets and reflects the material reduction in the long term forecast hard coking coal price of 15 per cent since December 2015," the company says in a market update.

"The impairment provides for all known exposures, including Aquila’s contractual obligations in respect of electricity and port access arrangements, resulting in Aurizon’s investment being written down to nil. As such, Aurizon has no remaining financial exposure to Aquila."

An additional $29 million impairment comes from for rolling stock, "to align national fleet requirements with forecast future demand.

"It also reflects the ongoing transformation benefits arising from continued improvements in efficiency and productivity."

MC and CEO Lance Hockridge notes the "tough and volatile market with lower growth conditions for our customers".

"More than ever in this environment, we are targeting further reductions in our cost base and finding new ways to drive asset and labour productivity," Hockridge says.

"Work is underway across the company, in reducing management roles, in driving down corporate and support costs and ensuring workforce numbers are aligned to forecast customer demand."

This cut little ice with the Rail, Tram and Bus Union (RTBU), whose members have borne the brunt of cost cutting in the past "despite the multiple failings of senior executives".

"It is simply galling that workers are being made to pay the price of the company’s failed mining investments," national secretary Bob Nanva says of news that the failed Aquila investment had been written off.

"Shareholders should be concerned that Aurizon is now cannibalising its own core business, and undermining its own future.

"Rail workers are highly-trained, and replacing them requires a significant investment – of both time and money.

"Further cuts to operational staff will undermine safety and performance, and leave Aurizon unable to respond to the next upswing in the commodities market."

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