Release Date: August 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Aurizon Holdings Ltd (QRNNF, Financial) reported a 14% increase in Group EBITDA, driven by higher volumes and regulatory revenue.
- The company announced an increase in the dividend payout ratio to 80% and a $150 million buyback, reflecting strong cash flows and reduced gearing.
- Coal volumes increased by 2%, with earnings up 16%, supported by contract growth and favorable customer mix.
- Bulk earnings rose by 7%, driven by increased iron ore and minerals volumes, despite weather disruptions and lower grain volumes.
- Aurizon Holdings Ltd (QRNNF) has made significant progress in safety performance, with improvements across all core safety measures and new safety frameworks implemented.
Negative Points
- Customer production issues and lower grain volumes negatively impacted bulk performance, particularly in Queensland.
- The containerized freight network is not yet hitting return targets, with utilization at 60% due to a softer industry environment.
- Higher operating costs were incurred due to additional labor and maintenance costs associated with volume growth.
- The company faced several rail crossing incidents and protester activity, impacting coal production in certain corridors.
- Aurizon Holdings Ltd (QRNNF) did not achieve the $100 million EBITDA target for Bulk Central due to delays in production from Northern Iron.
Q & A Highlights
Q: Can you provide details on the insurance recovery from derailment events in the bulk division?
A: The insurance recoveries were not material, with single-digit millions in FY23 and similarly insignificant in FY24. Therefore, specific figures were not disclosed. (Andrew Harding, CEO)
Q: Is the bulk central business still running at the $100 million EBITDA target set at acquisition?
A: The $100 million target was not achieved in FY24 due to delays in Northern Iron's production. However, we expect to reach this milestone in FY25 as volumes come into the mix. (Anna Dartnell, Group Executive Bulk)
Q: What is the outlook for net interest costs in FY25 compared to FY24?
A: We expect interest costs at the group level to be broadly flat in FY25 compared to FY24. This includes proactive refinancings and other financial adjustments. (George Lippiatt, CFO)
Q: Can you provide more color on the containerized freight business and its impact on the broader group?
A: The containerized freight business had a negative EBITDA contribution in FY24 but is expected to be broadly neutral in FY25. This improvement is due to increased volumes and the ramp-up of services. (Gareth Long, Group Executive Containerised Freight)
Q: What are the building blocks of CapEx for FY25, and does it include land bridging initiatives?
A: Growth CapEx is expected to be $125 million to $175 million, with sustaining CapEx around $600 million. Transformation CapEx will increase to $80 million, including projects like the Gillman terminal and battery electric locos. (George Lippiatt, CFO)
Q: Can you provide an update on the bulk central growth and specific customer contracts?
A: Bulk central growth includes contracts with Lioncrest and Northern Iron. In the West, we are working with junior miners in the Yilgarn region to offset the impact of Mineral Resources' transition to care and maintenance. (Anna Dartnell, Group Executive Bulk)
Q: What is the outlook for coal yields and underlying yields over the next few years?
A: The market for coal haulage services has stabilized, and we do not expect significant resets in the near term. Rates are important, but customers increasingly value flexibility and shared risk positions. (E McKeiver, Group Executive Coal)
Q: How do you plan to achieve the target returns for the bulk division, and what is the timeline?
A: We expect to achieve double-digit returns on invested capital within three to four years, based on the current pipeline and contracted volumes. (George Lippiatt, CFO)
Q: What is the status of the land bridging initiative, and are there any additional CapEx requirements?
A: The land bridging initiative is progressing well, with successful trials for transporting imported motor vehicles. It is too early to comment on additional CapEx requirements. (Gareth Long, Group Executive Containerised Freight)
Q: How do you manage the risks associated with new bulk contracts, such as those with smaller counterparties like Gold Valley?
A: We assess each opportunity on its merits and apply appropriate terms and conditions to mitigate risks. (Anna Dartnell, Group Executive Bulk)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
