COST CUTS TOP AURIZON'S AGENDA AFTER PROFIT SLUMP

Written on the 15 February 2016

COST CUTS TOP AURIZON'S AGENDA AFTER PROFIT SLUMP

AURIZON (ASX:AZJ) has swung into the red, with the rail operator recording a net loss of $108 million in the first half.

The loss represents a 135 per cent decline compared to a $308 million profit in the previous year, after the Brisbane-based business was hit with writedowns amid challenging trading conditions.

Impairment charges totalled $426 million, including $240 million announced to the market in December last year and $174 million relating to the proposed West Pilbara Iron Ore Project. The rail and port infrastructure project in Western Australia is unlikely to go ahead in the short to medium term.

A 5 per cent decrease in tonnages led to an 11 per cent decline in revenue to $1.76 billion compared to HY15. Aurizon's underlying earnings were also down 17 per cent to $403 million, in line with its guidance.

Aurizon managing director and CEO Lance Hockridge says the group will respond quickly as customers adapt to a difficult business environment in the resources sector.

"Cost reduction and transformation will remain the key drivers of margin growth and shareholder value creation, and we're determined to pull every cost and efficiency lever available to us," Hockridge says.

"Aurizon's transformation program since IPO has continued with strong momentum as we drive for benchmark performance across operational, customer service and safety metrics.

"However further reform is required in Aurizon's cost base to reflect the changed operating environment."

The program has delivered $308 million in benefits between mid-2013 and 2015, with the 2018 transformation target set at $380 million.

Aurizon managed to cut costs by $56 million in the first half of FY16, but will establish a dedicated transformation unit overseen by Hockridge to beat the FY18 target.

Further job cuts are expected, with the group's revised enterprise agreement allowing forced redundancies approved by the Fair Work Commission last year.

"Despite the short-term challenges, Aurizon is in a strong financial position with stable and long-term contractual arrangements with major customers and an ability to continue delivering strong returns to shareholders," Hockridge says.

"The regulated $5.6 billion network business generated nearly two thirds of group earnings this half and continues to demonstrate its value as a stable, defensive asset in a difficult environment."

Aurizon has forecast full-year earnings to be in the range of $845 million to $885 million, contingent on no material deterioration in trading and no major weather impacts.

The board has declared an interim dividend of 11.3 cents per share to be paid on March 29.

 


Latest News

INTEREST IN RETAIL PROPERTY SPIKES AS INTERNATIONAL BRANDS LOOK TO ROLL OUT IN AUSTRALIA

AN influx of international retail brands into Australia over the next five years are expected to push up demand for f...

MANTRA BOASTS OF SUCCESSFUL HOTEL INTEGRATION AS NET PROFIT GROWS 15 PER CENT

MANTRA Group (ASX:MTR) CEO Bob East has praised the performance of the company's new Honolulu Hotel as it posted ...

WHITEHAVEN TRIPLES EARNINGS, PAYS DOWN DEBT AFTER COAL PRICE TURNAROUND

THE HIGH coal price has allowed Whitehaven Coal to triple earnings and pay down a large portion of its debt in the fi...

BABY BUNTING BUOYED BY CLICKS AND BRICKS PERFORMANCE

BABY Bunting has grown sales 18.1 per cent to $135.1 million in the first half of FY17, sweetened by the opening o...

Related News

WHY EMPLOYEE-OWNED COMPANIES ARE BEATING ASX200 SHARE PRICES

EMPLOYEE-owned companies command a higher share price than their publicly listed peers, reaping a 17 per cent prem...

RISE OF THE MACHINES HAS WORKERS SWEATING

UP TO 3.8 million Australian workers are fearful their job may soon be terminated by a robot, a new survey has shown....

LESS TALK, MORE SMALL BUSINESS ACTION IN 2017

THE future growth and prosperity of Australian SMEs could be undermined if governments lose sight of the sector...

TEST DRIVE A POST GRAD AT BOND

THERE'S only one way to really move your career into the fast lane, says Bond University, and 'test driving...

Contact us

Email News Update Sign Up Contact Details
Subscriptions

PO Box 2087
Brisbane QLD 4001

LoginTell a FriendSign Up to Newsletter