"RELENTLESS" CUTS BOOST AURIZON PROFIT 188%
Written on the 16 February 2015 by Laura Daquino
AURIZON Holdings (ASX: AZJ) has boosted its net profit 188 per cent from the prior corresponding period, citing productivity improvements including redundancies as the main reason.
AZJ posted a NPAT of $308 million for the half year, with underlying EBIT at $486 million, up 15 per cent from the prior corresponding period.
The strong result was reportedly due to continuing benefits of the company's transformation program that reduced costs and improved productivity, providing for a $69 million benefit for the half year, as well as a $40 million sale at its Redbank facility and $13 million in redundancies.
Employees have dropped significantly since AZJ became privatised in 2010, transforming from Queensland Rail. There were almost 9400 employees in June 2010, and since then that number has now declined to less than 7000 for the first time.
The company also had a lower discretionary spend within operations and centralised support areas over the period.
Over the 18 month period to December, AZJ's transformation program delivered cumulative benefits of $198 million, in line with the targeted range of $250 to $300 million by June this year.
AZJ has today proposed it will engage in further structural reform, cost-cutting measures to "achieve alignment with global best practice".
CEO and managing director Lance Hockridge says the prevailing economic environment has compelled his company to be "relentless" with cost-cutting.
"In this subdued, low-growth economic environment, we've been relentless on cost reduction and productivity improvement," says Hockridge.
"Our transformation program is helping us achieve solid earnings growth when overall market demand and revenue are relatively flat.
"By continuing to deliver sustainable cost-outs, Aurizon remains on track to deliver on its core commitment to shareholders of a 75 per cent operating ratio for full year 2015 and continuing improvement in returns to our owners."
Despite what Hockridge regards as "cautious optimism" he is of this view that Australian commodity growth will be sustained due to strengthened Asian demand he also noted a "terrible black spot" during the company's past half year.
"A terrible black spot during this period was safety," he says
"After five years of continuous improvement, there was a deterioration in safety metrics due to a road accident in October 2014, which tragically resulted in the deaths of two employees and an Aurizon contractor.
"This accident has strengthened our resolve to achieve ZeroHarm."
AZJ opened today at $5.15 per share and has since dropped to $4.99.