Cyclone disruption and redundancy costs hurt bottom line
Aurizon has plunged to a full year loss, its annual results show, with it intermodal division to be sacrificed in response.
Underlying net profit after tax (NPAT) for the vertically integrated rail provider and infrastructure owner was $187.9 million in the red after the previous year’s profit of $72.4 million.
The main culprit was Cyclone Debbie, which affected the crucial Queensland operations, along with weaker freight rates.
These saw gross earnings down 4 per cent to $836 million, while total revenue was just about static at $3.452 billion compared with the previous $3.458 billion.
Cyclone Debbie impacted the business by approximately $89 million, $20 million in the Above Rail segment and $69 million in Below Rail, which is expected to be recovered in future years.
Above Rail was down $33.3 million, or 8 per cent, due to cyclone and weaker Freight performance.
Below Rail was down 3 per cent $15.5 million due to cyclone’s impact on catching up from previous issues.
Redundancy costs were $116 million.
Helping cash flow was $634.2 million from working capital improvements, reduction in capital expenditure and the sale of its 33 per cent of the Moorebank intermodal project in Sydney.
Harding’s take
It has been a tough results offering for MD and CEO Andrew Harding, who is also overseeing the divestiture of the intermodal business, which lost $56 million in earnings before interest and tax for the financial year.
“Today’s results and announcements underline our determination to return to the fundamental strengths of our core business and to ensure we unlock value and return it to shareholders,” Harding says.
“In our refined portfolio, we will leverage Aurizon’s operational and commercial capability in heavy haulage operations and rail infrastructure.
“With a simpler structure, greater management accountability, and taking leaders and decision making to regional areas we will improve our business and deliver better customer outcomes.
“My first nine months with Aurizon have confirmed the underlying value of our core business and the opportunity for genuine, sustained transformation.
“Yet I believe we’re falling short of shareholder and customer expectations. The right decisions, disciplined execution and sustained improvements are required.
“Intermodal has been under-performing with significant losses on a modest customer base for many years; it’s a legacy business long overdue for review.
“While it’s a difficult decision for affected employees, exiting will allow the company to concentrate on core, profitable parts of our portfolio.”
Intermodal lost $162.2 million due to trading performance during the year being lower than expectation.
Redundancy costs $115.8m, 924 employees were made redundant across the business.
On the plus side, labour productivity improved 10 per cent with changes to regional management structure and an Increase in variable train crew numbers.
Longer trains started operating in Newlands and Goonyella and active rollingstock numbers increased due to additional coal demand in New South Wales and Queensland.