Coronavirus threat to state’s coal exports

QUEENSLAND freight company Aurizon is on track to deliver strong earnings this financial year despite lower-than-expected coal transportation.

In its half year-results for 2020, Aurizon recorded underlying earnings before interests and tax of $456 million, a 12 per cent jump against the prior comparable period.

Revenue for the nation's largest rail freight and coal transportation company increased 5 per cent to help Aurizon deliver a 19 per cent rise in net profit to $268.9 million compared with 226.9 million at the same time last year.

The results has the company maintaining an EBIT guidance of $880 million to $930 million for the 2020 financial year.

Aurizon Managing Director and CEO Andrew Harding said the company had delivered "a solid operational and financial performance".

"Ongoing improvements in operational efficiency, including targeted investments in technology, are core to our continuing performance," he said.

Aurizon railed 106.3 million tonnes of coal in Queensland and New South Wales in the first half of 2020, down from 106.5mt at the same period last year.

"This was lower than expected due to a variety of factors, including customer-specific production issues and maintenance priorities," Mr Harding said.

 

Aurizon CEO Andrew Harding has announced a strong first half for the company. (AAP Image/Josh Woning)
Aurizon CEO Andrew Harding has announced a strong first half for the company. (AAP Image/Josh Woning)

 

The shortfall has resulted in expectations for FY2020 being in the range of 210-220 million tonnes.

The execution of two coal contracts with existing customers Peabody and Coronado will result in the extension of contract terms and additional tonnages, setting Aurizon up for a strong second half, Mr Harding said.

In its bulk business, Aurizon's underlying EBIT improved from $14 million to $44 million for the first half of 2020 as it secures new contracts, grows revenue with expanded services and additional volumes with existing customers, and delivers ongoing cost reductions.

"Bulk is now well-positioned to assess opportunities for profitable business growth, not only in traditional markets of iron ore, base metals and industrial products but also in the growth markets of fertilisers, building products and battery inputs such as nickel, copper and lithium," said Mr Harding.

 

Aurizon has the largest fleet of coal-hauling locomotives and wagons in Australia.
Aurizon has the largest fleet of coal-hauling locomotives and wagons in Australia.

 

The company faces external challenges beyond its control, with Mr Harding declaring it "too early to tell" how the coronavirus would affect its supply to Chinese customers.

"I can acknowledge it as an issue we're watching but I can't give you any more detail," he said.

"It's likely to have an impact but I don't have any data supporting that."

Mr Harding also acknowledged he was "anticipating some interruption" from east coast weather events, but said it was difficult to predict any material impacts.

The company has increased its share buyback by $100 million to $400 million and says it more than half completed.

 

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