Forecast up but reduced coal haulage impacts Aurizon

LOGISTICS group Aurizon has flagged a reduction in coal haulage at its Queensland rail network after an unfavourable draft ruling by the state’s competition regulator.

But it has affirmed its forecast for full- year underlying earnings after posting a firsthalf net profit of $ 281.5 million.

That tally is up 52 per cent from a year earlier, when its bot- tom line was weighed down by impairments and one- off items.

Earnings before interest and tax for the six months to December fell 5 per cent on an underlying basis – which excludes oneoff costs – to $ 485.3 million.

Chief executive Andrew Harding yesterday outlined the impact of a draft decision by the Queensland Competition Authority in December. The company said the ruling was flawed and had fundamental errors.

“We estimate the net impact of initial changes could reduce system throughput by approximately 20 million tonnes annually,” Mr Harding said.

Under the draft decision, the regulator has allowed lower- than- expected earnings from the business over the five years to June 2021, and asked the company to lower its planned maintenance charges.

“Going forward, Aurizon will prioritise lowest- cost main- tenance over ( network) flexibility – with no trains passing, a process advocated by the ( regulator) and its consultants,” which would result in lower volumes, Mr Harding said.

The rail freight group grew hauled tonnes in the coal business in the half on the back of continuing strong demand for metallurgical and thermal coal, but said a competitive market was putting pressure on contract prices.

In the bulk business, it has continued cutting costs and reforming its operations as part of its turnaround plan.

The network business posted a 3 per cent improvement in volumes for the half year.

The company affirmed its expectation that full- year underlying earnings would be in the range of $ 900 million to $ 960 million and declared a half- franked interim dividend of 14c a share.