Qube profit dips slightly but better results beckon

One-off expenses crimp first-half bottom line as firm awaits project payoffs

Qube profit dips slightly but better results beckon
The company is accentuating future positives


Intermodal facilities operator Qube is treading water as it waits for a series of investments and projects to mature and acquisitions to hit their stride.

Statutory revenue increased by around 10 per cent to $755 million but statutory profit after tax attributable to shareholders decreased by around 2.4 per cent to $47.8 million, its first half results show.

Qube’s underlying net profit after tax attributable to shareholders (NPAT) increased by around 19 per cent to $62.1 million and underlying net profit after tax and before amortisation increased by around 22 per cent to $67.7 million.

The statutory results were hit by several non-recurring items in the period mainly relating to the Patrick acquisition.

"The first half of FY 17 saw the completion of transformational acquisitions that substantially enhance the scope and quality of Qube’s operations and provide the platform for continued long term earnings growth," Qube MD Maurice James says.  

"Pleasingly, both operating divisions returned to earnings growth as a result of improved market conditions and their strong competitive positions in the markets in which Qube operates."

Qube’s underlying NPAT growth is mainly due to the increased contribution from the operating divisions and the initial contribution from the Patrick investment, plus a $22.2 million pre-tax contribution from Qube’s Asciano shareholding that was realised in the period as part of the completion of the Patrick acquisition.

Earnings also felt the impact of its capital raising and $23 million from the Moorebank lease surrender payment in the previous half, along with stamp duty costs associated with Patrick and AAT acquisitions and non-recurring Patrick transaction and restructure costs, partly offset by the reduction in tax expense resulting from the receipt of franked dividends and related loss from the Asciano pre-bid shareholding.

The Logistics division returned to revenue growth as a result of an improvement in rural commodity volumes including grain, sugar and cotton. Metropolitan container volumes also grew reflecting volume growth for Qube’s existing customer base as well as market share gains.

The improvement in profitability also reflects the success of Qube’s strategy to focus on the entire supply chain covering both import and export freight movements in order to increase asset utilisation and enhance service levels.

Underlying revenue increased by 4.9 per cent over the prior corresponding period to $328.8 million while underlying earnings (EBITA) increased by 8.9 per cent to $36.7 million and EBITA margins improved from 10.7 per cent to 11.2 per cent.

The rebound in mining and other commodities aided the Ports & Bulk division

Underlying revenue increased by 7.3 per cent to $363.7 million and underlying EBITA increased by 3.6 per cent to $35.0 million.

The small decline in EBITA margin from 10 per cent to 9.6 per cent "mainly reflects the business mix and the reduced volumes across some of the division’s oil and gas related fixed infrastructure".

Looking ahead

Qube had made significant investment in this area including on developing supply bases and the Dampier Transfer Facility, and says it "remains confident in the strategic nature of these assets which remain well placed to generate strong returns when activity in the oil and gas sector improves".

The profit from the divisional associates, Quattro Grain and TQ Holdings – where planning approval has been received for Port Kembla fuel terminal – was $900,000, an improvement on the loss of $0.6 million in the prievious fist half.

Qube’s 50 per cent interest in Patrick, bought by it and Brookfield Infrastructure Partners for $2.9 billion, contributed $12.8 million underlying NPAT in 4.5 months.

But it recorded a $25.1 million loss, mainly reflecting the impact of non-recurring transaction related costs such as stamp duty on Patrick’s statutory results. The loss of the A3 container line consortium’s business was a blow from November on.

Its Prixcar vehicle transport arm continues to feel the pain of car manufacturing’s demise.

On the plus side was a four year enterprise agreement with the Maritime Union of Australia (MUA) that is expected to be implemented by the end of February.

"In the longer term, the favourable structural dynamics of the container ports, driven by the ongoing decline in domestic manufacturing, population growth and an increase in containerisation of some export commodities, are expected to support increasing volumes for the entire industry," Qube says.

On Moorebank intermodal terminal, it expects management fee income to increase progressively from this month onwards now that financial close has occurred but it solid returns will have a while longer to arrive.

Meanwhile, two new proposed leases are being being finalised at the Minto hub, with returns expected next financial year.

Direct transport and logistics costs rose $10 million to $187.3 million, while repairs and maintenance also rose $6.3 million to $41.3 million but fuel, oil and electricity costs fell $2.5 million to $40.9 million.

With investments still at early stages and comopetitive pressures to remain high, Qube would only forecast that it would stay in profit over the full year.

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