Aurizon books improved profits, lower coal volumes
Despite soaring coal prices, rail hauler Aurizon says Australian miners have struggled to ramp up coal production to take advantage of the price.
Rail hauler Aurizon has dropped expectations for its coal volumes for the full financial year, saying disruptions at the mines of key customers would lead to slower growth in coal exports than it had expected.
The rail major declared a half-year profit of $257m on Monday, down 4 per cent on the previous year and dropped its interim dividend to 10.5c from 14.4c as it preserves cash to complete the acquisition of freight group OneRail.
Despite surging coal prices offering a major incentive for exporters to get product to market, Aurizon recorded a 3 per cent fall in coal volumes in the first half of the financial year.
Aurizon moved 98.7 million tonnes of coal to ports in NSW and Queensland in the half, with central Queensland volumes falling slightly to 70.3 million tonnes due to “customer specific maintenance and production issues across several customers, cessation of the Stanwell contract, wet weather, derailments and protester activity”.
Weather, protests and mine troubles also hit its NSW and southern Queensland volumes, which fell 7 per cent to 28.4 million tonnes amid rising prices for thermal coal.
Aurizon had expected full year coal volumes to rise about 5 per cent this financial year, but now says it expects them to be “broadly in-line” with last year.
“What we’re seeing is a bunch of issues that have coalesced in the last six months to cause lower production levels,” Aurizon boss Andrew Harding told reporters.
“And they relate to mine specific events, including a mine shutting down for several days because of a fatality, general operational issues at a number of mines. We’ve saw extensive flooding in NSW, and the general background of Covid-19.”
“It was very operational – it clearly wasn’t driven by the price because as a former mine manager I can guarantee I would have been trying to get as much volume out as I could.”
But Mr Harding warned that, despite rampant coal prices continuing, he did not believe a sudden rush of export coal could be delivered in the short term, saying it was difficult for major producers to swing extra production into the market in a hurry.
“The status quo is a strong possibility for a while,” he said.
Aurizon booked $286.2m in underlying earnings from its coal division, up 4 per cent for the year, despite the loss of coal volumes.
Its bulk business – which includes other metals and agricultural products – booked a 1 per cent lift in underlying earnings to $74.5m on the back of strong grain harvests in Queensland and NSW.
Aurizon booked underlying earnings of $727m for the half, broadly in-line with the first half of the last financial year.
Mr Harding said the company reduced its interim dividend as it prepares its balance sheet for the close of its $2.35bn acquisition of OneRail, with the company having previously flagged a reduction in shareholder payments as it looks to hold onto its current credit rating.
Aurizon is still to settle on a strategy to divest OneRail’s NSW coal haulage business, required as a condition of the transaction, but Mr Harding said the company had already received a number of approaches from potential buyers – even though it is yet to close the OneRail acquisition.
“We’re very happy with the concept of a demerger of the east coast rail business, once we actually own the business and are able to undertake something like that. But we have had a number of enquiries – but they’re early stage,” he said.
Aurizon shares were up 4c to $3.68 on the ASX at lunch time on Monday.