Aurizon shares slumped on Monday despite posting improved profits
Aurizon boss Andrew Harding has staked his leadership of the company on reducing the rail hauler’s reliance on thermal coal business, but analysts say the jury is still out.
Aurizon shares tanked on Monday despite the company announcing a $150m buyback, after earnings disappointed the market. The rail hauler’s statutory net profit rose 25 per cent for the year to $406m, with revenue up 9 per cent to $3.84bn and earnings before interest, tax, depreciation and amortisation up 14 per cent to $1.62bn.
But analysts noted Aurizon had missed analyst consensus expectations on a range of measures, and had issued guidance for only slight improvements in its financial performance for the coming year.
Underlying EBITDA from Aurizon’s core coal-hauling business missed expectations by 2 per cent, and earnings from its rail network also fell slightly below analyst predictions.
And even though earnings from Aurizon’s bulk haulage business were up, analysts expressed concerns about its performance, given its centrality to the company’s strategy of reducing reliance on its thermal coal business. Thermal coal was worth about 29 per cent of Aurizon’s revenue in 2024, and the company wants to reduce that to 10 to 20 per cent by 2030 by growing its presence in containerised freight and other bulk haulage such as grain and other mineral haulage.
Aurizon launched its east coast containerised freight business in April 2023 after signing an 11-year deal to haul containers for Team Global Express – worth $1.bn when it was announced.
But Aurizon’s annual financial results suggest that business is off to a slow start. The rail hauler completed the ramp-up to its full schedule of seven weekly services in April, including five runs across the country to WA, and two services on the east coast rail network, and has since added a Melbourne-to-Adelaide run to its schedule.
The company does not separate out its containerised freight business in its financial statements, but instead captures its performance in an “other” category – which booked a $63m EBITDA loss for the financial year, down 17 per cent.
And Aurizon is flagging only that the containerised business will break even in the current fiscal year, telling shareholders on Monday it expects the business to have a “broadly neutral EBITDA contribution”.
Aurizon boss Andrew Harding told reporters pressure on consumers and household budgets had hit its new business through the year, saying it had been “softer than the industry would expect”.
“If they’re not spending their money on things that go into containers, then there are fewer containers,” he said.
“The real test is the first full year of operations, which is the year that we’re in now.”
An increase in mineral and iron ore volumes, mostly in WA, helped Aurizon’s bulk division improve underlying EBITDA to $229m, with the company saying soft grain volumes and weather disruptions hit the overall result.
Citi analyst Samuel Seow said the “jury was still out” on Aurizon’s bulk and containerised haulage strategy. “EBITDA of $229m was largely in line on good cost control; however, we note earnings before interest and tax (EBIT) actually declined 5 per cent year-on-year as depreciation and amortisation continues to increase with invested capital,” Mr Seow wrote in a client note.
“Additionally, bulk and containerised freight investments will continue to be topical given lower-than-expected returns.”
Aurizon’s efforts to revive the Darwin landbridge haulage idea – using rail to link smaller import terminals such as Darwin, Townsville, Gladstone and Newcastle to east coast markets – are also off to a relatively slow start.
Aurizon launched the plan at its annual investor day in July 2023, and Mr Harding said the idea was showing “green shoots”.
The company said on Monday it had launched trials on hauling small numbers of imported cars on the Darwin line in June.
Aurizon shares closed down 32c, or 8.8 per cent, to $3.30 on Monday.
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