Qube reports record profit despite Covid, China sanctions

The logistics and infrastructure business lifted profit by 39 per cent despite challenging shipping schedules, port congestion and extreme weather events.

Qube chief executive says the result shows the company is able to effectively deal with cost pressures.

Logistics company Qube Holdings is on the lookout for more acquisitions following a record profit, with a balance sheet strengthened by its $1.6bn deal to sell its property interests at Moorebank, in Sydney’s west.

Chief executive Paul Digney told analysts that the company would continue to look at bolt on acquisitions like those which have been successful for the company in the past.

The company spent $127m on four acquisitions in the last financial year, the biggest of which was the $100m purchase of grain export terminal at Newcastle.

Finalised in October last year, the deal has helped Qube deliver higher profits from grain handling.

Mr Digney said Qube had a “healthy pipeline” of potential deals but he said the company would be selective in what it bought.

“There is a lot of opportunity for us either from people who have made direct contact and opportunities which will come to market over the year one or two years,” he said.

“We are happy to be patient, but there will be acquisitions.”

He was speaking after Qube reported a 26 per cent rise in underlying net profit to a record $201m and a 39 per cent jump in net profit to $127.5m for the year to the end of June, on the back of continued strong exports from Australia of grain and iron ore.

Qube shares jumped on the result, closing up 23c, or 8.5 per cent at $2.94.

The company said the result, which was recorded after a 27 per cent increase in underlying revenue to $2.6bn, reflected continuing high volume in Qube’s core markets, including containers, grain, steel, mining bulk commodities and general cargo.

The higher profit was recorded despite the impact of border closures in Australia due to Covid and lockdowns and trade sanctions in China which disrupted global shipping operations and hit timber exports to the country from New Zealand.

The company estimates that a range of factors including Covid, port congestion, lockdowns and extreme weather events cost it some $15m in earnings.

The company said the sale of its interest in the warehousing and property components of the Moorebank Logistics Park, for some $1.6bn, was successfully completed in December last year, allowing it to finance a $400m share buyback.

The deal saw its net debt position down from $1.4bn in June last year to $890m as of June 30 this year.

Qube has spent almost $600m on a range of acquisitions over the past five years which it says have strengthened and diversified its business.

The company said its strong earnings result shows the resilience of its business and its “ability to mitigate multiple challenges including the ongoing impact of Covid-19, China lockdowns and trade sanctions and extreme weather events”.

The company’s logistics and infrastructure business had a 31 per cent rise in revenues to $1.13bn despite the challenges of shipping schedules, port congestion and extreme weather events, with underlying earnings before interest and tax up by 37 per cent to $146m.

The division saw a larger contribution from its grain handling business which includes bulk and containerised haulage, storage and loading operations.

Its ports and bulk business saw a 27 per cent increase in its revenue to $1.44bn, with underlying earnings before interest and tax up by 6 per cent to $137m.

The company said its stevedoring activities were strong with higher bulk volumes, mainly from steel imports and grain exports.

Qube also benefited from its 50 per cent stake in Patrick Terminals which recorded a 27 per cent increase in underlying net profit to $65m.

Mr Digney said the strong result showed the company’s ability to “effectively mitigate cost pressures through scale, operational performance and productivity initiatives, as well as through contractual mechanisms.”

The company says it expects strong growth in underlying revenue and earnings from its operating division, with the logistics and infrastructure business expected to achieve a higher earnings growth than its ports and bulk business unit.

Qube is expecting to spend another $400m to $500m on capital expenditure in the current financial year, excluding new acquisitions, higher than the $390m in capital expenditure in the financial year just ended.

The new spending will include buying new locomotives and rolling stock, new warehouses and storage sheds and transport fleet equipment.

The company will pay a full year dividend of 7c a share, up by 16.7 per cent.