Virus risk to coal demand
Aurizon warns of softening export signs
QUEENSLAND rail giant Aurizon has warned the COVID-19 pandemic will curb demand for Australian coal.
Brisbane-based Aurizon’s net profit rose 28 per cent to $605m for the year to June 30 on the back of a 5 per cent increase in revenue to $3.06bn.
Underlying earnings before interest and tax (EBIT) rose 10 per cent to $909m but Aurizon flagged underlying earnings would fall to $830m to $880m in the current financial year.
Aurizon chief executive Andrew Harding said demand for coal was expected to soften during 2021 due to COVID-19 especially for metallurgical coal shipped to Asia.
“There is a terrible short impact of COVID on the steel industry but we do see it as temporary,” said Mr Harding.
“You will see soft production export from Australia though the first half and we are seeing signs of that already.”
Mining giant Glencore last week announced that it would temporarily shut its Queensland and NSW coal mines due to tepid demand and a slump in prices. Aurizon’s coal business delivered 214 million tonnes of coal for customers during the 2020 financial year, which was broadly in line with the previous 12 months.
But volumes are expected to range between 210Mt to 220Mt for the current year.
Aurizon chief financial officer George Lippiatt said China and India were the two most important markets for steel demand for Australian coal exports.
He said Chinese steel production increased 4 per cent in the 2020 financial year.
“We see that continuing, however what we have seen offsetting that is reductions in India,” Mr Lippiatt said.
Mr Harding said Aurizon had benefited during the pandemic from having a decentralised workforce. He said 80 per cent of Aurizon’s staff worked in regional areas.
Aurizon will embark on a new $300m shares buyback this financial year after completing a $400m buyback last year. It will pay a final dividend of 13.7c per share, up 10 per cent from a year ago, with the total dividend at 27.4c.
Aurizon shares closed up 10c, or 2.2 per cent, at $4.65.