Qube books Chalmers win but braces for uncertainty


Market clouds gather after first half but acquisition pays out early on land sale

Qube books Chalmers win but braces for uncertainty
Qube's strategic moves should help it ride out market volatility, it says

 

Qube is wary of the potential impact of domestic and global volatility on its bottom line in 2020, the logistics giant reveals in its half-year update.

It comes as mixed results up to December 31 show statutory revenue rose 14.4 per cent to $957.3 million while statutory net profit after tax (NPAT) fell 15.9 per cent to $51.7 million on the previous corresponding period (pcp), attributed to a "new leasing standard which … will adversely affect Qube’s statutory earnings but has no impact on Qube’s cashflow or underlying earnings".

Qube’s 50 per cent interest in Patrick also saw $22 million underlying profit, an increase of 15.2 per cent over the pcp.

"Growth was achieved despite the continuation of headwinds that adversely impacted volumes in several of Qube’s key markets including container volumes, vehicle imports and rural commodities," the firm notes, pointing to the impact of the drought on NSW rail operations and empty container park activities, and weakness in volumes of vehicles, cement, steel and scrap metal.

That may be compounded by bushfires, adverse weather events and the coronavirus in the second quarter.

"Although these events have not had a material ithe corresponding periodmpact on Qube’s first half results, Qube currently expects some weakness in its second half underlying earnings as a result of the above factors that is likely to result in the level of underlying earnings growth in FY20 being lower than previously forecast.

"The uncertainty of these events, in terms of the quantum of their impact on Qube’s earnings and their likely duration, makes forecasting near term earnings inherently uncertain."

KEY DEVELOPMENTS

Despite the looming uncertainty, the company hails "both organic growth across Qube’s operations as well as the contribution from recent acquisitions and capital expenditure".

Of note, it highlights two major contract wins.

A major Shell Australia supply chain contract was won due to Qube’s ability to leverage its ports and logistics capabilities including those from the purchase of mining and industrial services firm LCR, the firm says.


The details of that Shell that contract win, here


It also entered into a binding agreement with Bluescope to, from 2022, provide interstate steel train services and the provision of intermodal terminal operations at Qube's North Dynon facility in Melbourne.

"This is expected to become Qube’s largest individual contract and customer (by revenue) once fully operational.

"Qube presently expects to spend around $73 million on new rolling stock and infrastructure to support this contract, supplemented with additional leased equipment."

Interestingly, Qube’s recent Chalmers buy also appears an astute acquisition.

"In September 2019, Qube completed the acquisition of the ASX listed company Chalmers Limited for a total purchase consideration of $55.4 million and has successfully integrated the Chalmers operations into its existing logistics business.

"This acquisition came with some freehold land which was surplus to Qube’s requirements. In November 2019, Qube entered into a binding contract to sell the freehold land for $65.0 million.

"Qube remains on track to achieve the forecast synergies and the acquisition is already contributing positively to the financial performance of the Group."

Qube notes its Moorebank Logistics Park (MLP) development continues with key highlights including the start of Target warehouse operations, import/export (IMEX) rail and terminal operations, progress on precinct works on Moorebank Precinct East (MPE), including two new warehouses, and warehouse and rail activities on Moorebank Precinct West (MPW).

It also notes negotiations are progressing with a potential major tenant for a material part of MPW, along with a "monetisation/partnering process focussed on MLP that may enable Qube to realise some of the substantial value that has already been created and to reduce Qube’s future funding requirements".

"There has been a steady performance across the Qube group demonstrating again the resilience of our earnings base across our chosen markets," Qube MD Maurice James says.

"Qube was able to deliver earnings growth despite challenges in some parts of the business including declining motor vehicle and container volumes and the continued effect of the drought."

 

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