Coal Hauler Aurizon's Profit Falls on Writedowns -- Update
By Rhiannon Hoyle
SYDNEY--Australia's Aurizon Holdings Ltd. (AZJ.AU) said its fiscal first-half profit fell 39% as it looked to use fewer trains to transport coal and iron ore from remote mines, although it signaled confidence in continued demand for the commodities it hauls.
The rail-freight operator wrote down the value of its locomotive fleet and two rail projects by 197 million Australian dollars (US$178 million) in the six months through December, reducing net profit for the period to A$107 million, versus A$176 million a year earlier. The earnings result was just below a A$115 million median of four analysts' forecasts compiled by The Wall Street Journal.
Still, Aurizon Monday reported an 18% lift in underlying profit, citing record volumes of coal and iron ore.
Aurizon is hauling higher volumes on its rail network despite a recent slowing in mining investment in Australia. That is because mines under construction when commodity prices were still running hot are now becoming operational or ramping up to peak production.
Like many companies servicing Australia's mining industry, though, Aurizon has been taking a hard look at costs to protect its profits as commodity prices cool. The A$10.9-billion-valued company plans to reduce its locomotive fleet by nearly a third by 2018, and lower the number of wagons it owns by 12%--a move it says will help reduce spending on maintenance at a time when companies have been focusing on shoring up their balance sheets and improving returns to shareholders.
Chief Executive Lance Hockridge said employee productivity had improved by 20% during the half, with operating costs down 11%.
"Our trains are running faster, with bigger payloads, lower fuel and on a lower maintenance footprint," Mr. Hockridge said on a conference call with reporters. "We are doing more with less."
The Brisbane-based company increased its interim dividend to 8.0 Australian cents a share, from 4.1 Australian cents last year, in a show of confidence over its near-term outlook.