Aurizon shares take a hit as rail hauler cuts final dividend

Despite a ‘resilient’ performance in the face of severe weather and Covid-19 interruptions, the rail hauler’s shares fell after a cut to the final dividend and a slide in net profit.

Coal loading onto an Aurizon train near Blackwater in Central Queensland. Picture: Rae Wilson

Aurizon shares closed down on Monday after the rail hauler cut its final dividend and booked a $513m net profit for the financial year, down 15 per cent.

Aurizon will pay a 10.9c a share final dividend for the year, down 24 per cent from the 14.4c a share payout in 2021, despite the company’s core earnings being relatively steady for the year.

Aurizon said its bulk coal business booked earnings before interest, tax, depreciation and amortisation of $541m for the full year, up 1 per cent, despite a 4 per cent drop in volume for the year.

The company said its net profit was 15 per cent lower due to one-off benefits booked the previous year, including the tax benefit from the sale of its shares in Aquila Resources.

Aurizon managing director Andrew Harding said the company had delivered a “solid operational and financial result” despite the impact of the pandemic and major flooding in Queensland.

“Aurizon has proven how resilient it is as a business, when you think about the factors that we‘ve seen flowing through this year – of weather, the impactful Covid-19 issues and also customer production issues – the business has continued to show its resilience,” Mr Harding told reporters.

But, amid expectation of record profits for its coal customers, Aurizon shares closed down 14c, or 3.5 per cent, on the back of the results. Shares in the company have risen 8.6 per cent, or 31c, since the start of the year.

Aurizon booked revenue of $3.08bn, up 2 per cent for the year, with underlying EBITDA of $1.47bn and underlying earnings before interest and tax of $875m, down 3 per cent.

Aurizon closed its acquisition of One Rail Australia in July, and Mr Harding said the buyout would deliver “an immediate uplift in earnings” as well as a platform for future growth.

The company said it expects EBITDA of $1.47bn to $1.55bn for the current financial year, with coal volumes likely to increase – but earnings from its coal division likely to be lower as the flow on effect from its contracts kick in.

As part of its deal for One Rail, Aurizon had agreed to divest its east coast operations to win agreement for the acquisition from competition regulators.

Mr Harding said on Monday Aurizon was still yet to decide whether it would sell or spin out the operations, with about 10 potential buyers looking over the company’s books. Non-binding bids for the business are due in September, Aurizon told analysts.

Despite delivering a solid performance through the year, Mr Harding said the company faces lingering challenges from skills shortages, particularly in finding drivers – despite an intensive effort across the industry, including from major miners such as BHP, to train more drivers for bulk rail.

The Aurizon boss said the company had not seen any significant loss of drivers due to poaching from West Australian iron ore miners after the interstate borders opened, but said the growth in rail haulage across the country meant there was still a shortfall of train drivers. “At this moment in time, our training schools are full across the country running particularly hard. The borders opening didn’t really change the demand for drivers,” he said.

The company’s grain haulage business in WA had struggled to find drivers amid stiff competition from iron ore miners, and after farmers had a record harvest last year and expects another bumper 20 million tonne crop this year.

“The pressure on grain haulage in Western Australia from a driver shortage was more extreme late last year, and it‘s less, less difficult now, so we’ve seen that improve over time,” Mr Harding said after announcing the results.

“But generally as a sector train driver availability would be probably the biggest issue and it‘s as bad as it’s ever been, if not worse at this moment in time.”

Aurizon’s bulk business – which includes its grain haulage, iron ore and other commodities business – booked EBIT of $93m for the year, down 17 per cent on lower iron ore volumes.