Aurizon profit lifts on coal revenue general freight expansion hit by consumer slowdown

Aurizon’s bid to diversify through hauling retail goods across the country is off to a slow start, but its core coal business helped the company to a substantial boost in first-half earnings.

Aurizon’s bid to diversify its business through hauling retail goods across the country is off to a slow start, hit by the slowdown in consumer retail spending, but the company’s core coal business helped the company to a substantial boost in first-half earnings.

Aurizon booked an improved $237m net profit for the first half of the year, with the company declaring a 9.7c share interim dividend on the back of the result, or about 75 per cent of its underlying net profits – and said it would look for ways to improve shareholder returns at its full-year results.

The company’s statutory profit was up 82 per cent compared to the same period in 2022, with underlying earnings before interest, tax, deprecation and amortisation (EBITDA) up 26 per cent to $847m on a 16 per cent revenue improvement to $1.97bn.

Aurizon boss Andrew Harding said the company’s coal earnings lifted $53m, or 23 per cent, for the half to $283m, with a lift in coal volumes also lifting earnings at the company’s rail network business, where EBITDA gained $1223m, or 43 per cent, to $486m for the half.

Earnings from the company’s bulk division lifted $12m to $112m.

Aurizon said it was still on track to deliver underlying ­EBITDA of $1.59bn to $1.68bn for the full financial year.

Mr Harding told analysts on Monday the company expected its free cash flow to improve in the second half of the year, as Aurizon bedded down its $2.35bn acquisition of One Rail, with the company looking for ways to return its payouts to higher levels under its policy of paying out 70 to 100 per cent of underlying profit.

But its plans to expand beyond its traditional coal operations in Queensland and NSW are moving relatively slowly, with Mr Harding saying on Monday the ramp-up of its transcontinental containerised business was still a work in progress.

Aurizon has said it wants to be hauling 500,000 TEUs (twenty-foot equivalent units) a year by 2030, as part of its plan to reduce its reliance on hauling thermal coal to 10 to 20 per cent of its revenue by the same date.

But, a year after Aurizon signed a $1.8bn contract with Team Global Express – billed at the time as its biggest ever non-coal contract – the ramp-up of the business remains slow.

Aurizon promised to spend $280m to expand its infrastructure and rolling stock to meet the contract’s demands, and the company’s half-year accounts show that spending is still running well ahead of the revenue from the haulage contract. The business division that includes that contract booked a $38m loss before interest and tax for the first half of the year, against a $22m loss for the last six months of 2022.

Amid a slowdown in retail spending, Mr Harding said softer freight market conditions had flowed through to volumes on its containerised trade, with only about 65 per cent of its available capacity in use. Aurizon plans to be running seven services a week in the business, and expects to be doing so by the middle of the year.

Improvement had been seen elsewhere in Aurizon’s non-coal bulk division, Mr Harding said, with the company picking up two new contracts to haul iron ore in the Northern Territory, and flagging an expansion of its haulage business in WA. Aurizon shares closed up 12c to $3.88 on Monday.