Qube chairman preaches patience on mid-term investments

Rise in net profit before amortisation forecast for next annual result

Qube chairman preaches patience on mid-term investments
Demolition at the Moorebank import-export terminal site


Qube is rolling towards better times once strategic investments mature, according to chairman Allan Davies.

In an address to shareholders, Davies forecast reasonable returns for the full financial year but modest immediate growth at best.

"In FY17, through the acquisitions of 50 per cent of Patrick, Aurizon’s Moorebank interests and the other 50 per cent of AAT [Australian Amalgamated Terminals], Qube has assembled a unique portfolio of high quality and strategic infrastructure assets that will drive efficiencies across the logistics supply chain," Davies tells shareholders.

"In the shorter term, while Qube is undertaking the investment to develop some of these assets, its earnings will not reflect the substantial value that is being created.

"However, despite its significant investment and ongoing competitive market conditions, Qube continues to expect to report an increase in underlying earnings, being NPAT (pre-amortisation) in the 2018 financial year."

Market conditions are seen as similar to last year, "with pressure on rates from the ongoing competitive dynamics in Qube’s key markets".

"The Logistics and Ports & Bulk divisions are both expected to deliver underlying revenue and earnings growth," Davies says.

"The extent of growth in earnings in the Ports & Bulk division will be influenced by conditions across commodity markets, particularly strength in forestry volumes, vehicle volumes as well as any recovery in activity levels in the oil and gas sector.

"The earnings from the Logistics division’s Sydney operations will be impacted in FY18 by additional interim operational costs as the business waits for the Moorebank Logistics Park’s facilities to be developed over the next two years."

Sydney operations will start consolidating some of its existing activities at Moorebank from the year after next and this year’s poor grain harvest will crimp the logistics division’s returns.

The from the Strategic Assets division will include a full period’s contribution from AAT, which is benefitting from strength in passenger vehicles and mining related equipment despite reduced earnings from AAT’s Melbourne operations.

That division is also expected to see increased management fees for Moorebank Intermodal Company (MIC)-funded works at Moorebank.

Modest warehouse rental income is expected from the existing warehouses at Moorebank. The capex from this division is expected to increase significantly this financial year as the Moorebank development ramps up.

Earnings from Minto Properties are expected to be lower this year, while the capital expenditure for the new Mazda lease is undertaken with earnings then increasing from the following year onwards.


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