Blue chip stocks like Aurizon not immune from Whyalla woes

Whyalla Steelworks in South Australia. Picture: Dean Martin

The problems at the Whyalla steelworks, owned by Sanjeev Gupta’s GFG Alliance, are spreading through corporate Australia, with Aurizon on Monday announced a hefty provision for bad debts.

Aurizon, the country’s largest freight operator, counts the South Australian steel business as a ­customer.

In its half-year result, it announced an $11m provision for bad debts. While the provision related to more than one customer, analysts attributed it to Whyalla as the steelworks operator has not been paying bills from its sub­contractors.

For the six months to December, Aurizon said its total operating costs increased due to volume growth (train crew and maintenance costs) and higher doubtful debt provisions. Earnings before interest, tax, depreciation and amortisation fell 4 per cent for the half to $814m, net profit fell 14 per cent to $205m, and revenue increased 3 per cent to $2bn.

It comes after The Weekend Australian reported that GFG Alliance’s vow to pay back the millions owed to its many creditors had been met with scepticism from the South Australian government, which may force the company into administration.

The company on Friday announced it had settled its debts with collapsed financier Greensill Capital and would raise funds by selling its stake in the Tahmoor coal mine, estimated to be worth about $300m.

But there was no timeline for GFG to pay the $350m owed by its troubled Whyalla steelworks.

Mr Gupta, who has wrestled with debts following the collapse in 2021 of his empire’s key lender, Greensill, has faced sustained attacks for over-promising and under-delivering on his vaunted $3bn “green steel” investment in the state’s Iron Triangle.

GFG Alliance is facing huge challenges on multiple fronts abroad with creditors for collapsed former GFG financier Greensill Capital pursuing Mr Gupta for $800m.