August 20, 2014

Aurizon considers track sale as profits drop

Written by  Mark Carter
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Aurizon's coal operations in New South Wales continued to expand in the 2013-14 financial year. Aurizon's coal operations in New South Wales continued to expand in the 2013-14 financial year. Aurizon

AUSTRALIAN railfreight operator Aurizon has indicated it may consider selling off a major share in its 'below rail' Network Access business as a means of raising capital for major projects aimed at increasing its volumes in the bulk-coal and iron-ore markets.

The comments were made by Aurizon CEO Mr Lance Hockridge to local media following the release of Aurizon's annual results for the 2013-14 financial year, which showed a drop in profits as it comes to terms with softening trading conditions and a number of significant impairment costs on earnings.

Net profit after tax dropped by 43% from $A 447m ($US 415m) in 2012-13 to $A 253m in 2013-14, while total revenues increased by 2% from $A 3.77bn to $A 3.83bn.

Coal volumes grew in both Queensland and New South Wales for a 2013-14 to reach 210.4 million tonnes, an increase of 9%. Iron-ore volumes grew by 21% to 29.9 million tonnes, although this will drop to around 23 million tonnes in 2014-15 due to the loss of a contract in Western Australia.

Aurizon chairman Mr John Prescott was upbeat, saying the company had "again demonstrated an ability to deliver a solid financial performance in tough market conditions."

Prescott continues: "The past year has seen a further deterioration in domestic economic conditions, with continued downward pressure on commodity prices, as well as volatile global equity markets. This environment has impacted many of our major customers and presented significant challenges for Aurizon."

The company plans to raise capital spending on committed projects to around $A 600m annually for the next three years and also anticipates that it will achieve an operating ratio of 75% in the 2015 financial year.

With previously-announced medium-term infrastructure projects planned in Western Australia's Pilbara region (iron ore) and the Galilee Basin (coal), Aurizon has indicated it would be prepared to sell a stake in its track infrastructure serving the Central Queensland coal network.

Analysts estimate that Aurizon could raise up to $A 2bn from a 49% sale in its 'below rail' network.

However, Hockridge told the media that while the option was being actively considered by the company, no final investment decision had been taken, and no potential investors have been approached.

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