Containers and general freight crimp Qube outlook


Company optimistic amid guidance withdrawal and executive pay cuts

Containers and general freight crimp Qube outlook
Maurice James

 

As freight transport remains an essential service during the Covid-19 crisis, logistics giant Qube expects most of its operations to continue – but in reduced volumes, it reports.

Thus Qube withdraws its earnings outlook, citing "a decrease in volumes in several of its markets as the impact of the tighter restrictions impacts demand as well as operations".

It reassures stakeholders that the business still benefits from its diversified operations, however, enabling it to generate positive earnings and cashflow.

It summarises its business activity up to March 31 as the following:

  • bulk activities continue to experience normal volumes with minimal disruptions or slowdowns.
  • forestry related logistics activities in New Zealand have also experienced solid volumes although will be impacted by the recent closure of forestry operations in New Zealand for an initial one month period in accordance with directions from the NZ Government.
  • oil and gas activities have also been steady, benefitting from the ramp up of the new Shell contract and the nature of Qube’s activities which largely involves logistics support to existing producing facilities.
  • container volumes across Qube’s operations as well as Patrick have been weaker reflecting the general slowdown in economic activity in Australia (pre-Covid-19), the impact of manufacturing and port closures in China (particularly in February 2020), and global supply chain disruptions.
  • other products including vehicles, bulk (e.g. cement, fertilisers) and general cargo have been weaker.

Qube spoke of its Chalmers win in its half-year update


In response Qube is switching its focus to reducing its cost base, the company notes, deferring non-essential capital expenditure, which comprises changes to executive payment.

The board and managing director Maurice James are reducing fixed remuneration by 50 per cent, and senior management has also committed to "significant reductions".

The measures will initially apply from April 1 to June 30, and include utilisation of annual and unpaid leave.

"These are challenging times for our customers, our partners, our employees and for Qube. Despite the significant challenges ahead, Qube is well positioned to work with all its key stakeholders to address the current challenging environment," James says.

"Qube is in a strong financial position with significant liquidity (cash and available undrawn facilities) of over $450 million after the payment of the interim dividend which will occur on the 7th April 2020.

"Qube has no near term debt maturities and material headroom to its covenants.

"Qube is pursuing several initiatives to further increase its liquidity including increasing its bank facilities and progressing its property partnering/monetisation process to ensure that Qube is well placed to continue to fund suitable growth opportunities in the future."

On the latter point, Qube says it has received significant interest from prospective partners in the next stage of the Moorebank Logistics Park partnering process.

"Qube notes the terms of formal agreements have now been finalised with a potential major tenant for a material part of Moorebank Precinct West," it adds.

In light of the current environment the process is likely to take longer to progress than previously anticipated, Qube states.

 

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