Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Qube Holdings Ltd (ASX:QUB, Financial) delivered double-digit growth for the fourth consecutive year, showcasing the robustness of its business model.
- The company saw positive performance across most key markets, with expectations of continued growth in 2025.
- Automotive volumes remained high throughout the year, contributing significantly to overall performance.
- Qube Holdings Ltd (ASX:QUB) has a strong safety culture, with improvements in key safety metrics despite a tragic incident.
- The company is confident in achieving a 12% return on capital employed over the midterm, up from the previous 10% target.
Negative Points
- The agri sector underperformed in 2024 compared to 2023, although a stronger performance is expected in 2025.
- New Zealand log exports remained flat, although earnings improved due to cost reduction measures.
- The resources sector faced volume challenges with some customers, and ongoing issues with commodity prices and labor shortages are expected to persist.
- The Moorebank IMEX terminal incurred a $7 million EBIT loss last year, although it showed a small profit in July.
- Higher underlying net finance costs, which increased by $32-$33 million compared to FY23, impacted overall financial performance.
Q & A Highlights
Q: If I can start with the sale of these assets of the Moorebank and state terminal, just the justification of why you're looking to exit that asset.
A: Yes, Anthony, we've just flagged it. It's a consideration. As you are probably aware that a core part of our strategy, a core part of our assets at Moorebank is the IMEX terminal. The interstate terminal is a part of our deal with the government was an obligation. And under a joint venture arrangement with Open Access, if there is interest from others, we're not really losing too much strategy benefit. We can still use the asset, and our core focus is around IMEX. So we're just considering all options, and there's interest, we will consider it. That's where we're at this point in time.
Q: Can I ask on the acquisition of Coleman's? We've seen a lot of bolt-on acquisitions, but obviously a lot of acquisitions over WA. At what point do you think you've got sufficient scale in the WA market that you're more likely to go for growth that's more organic than acquisition led?
A: Yes. We saw the Colemans acquisition is pretty unique. It's a unique supply chain asset. It's sort of some ways hard to replicate, given the licensing and the type of facilities they were. So we saw it as definitely an infrastructure play. And so when these assets come to market, or there's discussions about we looked at it, we complement Kalari, complements our inbound mine supply logistics with the Kalari acquisition. So given the timing of it, given what we do on the East Coast in that space, we saw it as a really good opportunity. So we didn't want to miss that opportunity.
Q: Just going to start with Patrick, if I can, please. You've given us an average market share for FY24 of 47%. You've told us it was 49% in the first half. Do look like the average share that you retained through the second half was 45%? I think the commentary so far on the call has been that you're trending back at that 42% level. Can you just talk to some of those dynamics and how we think that plays through the earnings guidance, please?
A: We've got back to 42%. Everything is normalized. Now I think in the first half, at some point, we were closer to 49%. And then it's on its way back to 42%, which is really on the back of all the industrial action that occurred at DP World. So we're already at 42% at this point in time. And we believe that's going to be stable throughout the year.
Q: Just in the ports and bulk business in the second half, it looks like you had pretty strong uplift in both EBITDA and EBITA margins. Can you just give us a sense of what's going on there? Is there some mix issues that we need to be considerate of? Is there operating leverage that's flowing through there? Just give us a little bit more than what's in your presentation materials from that, please?
A: I think we've spoken over the last year or so that the ports and bulk business going through some of the challenges around inflationary rises and cost and catch up and some of the issues around labor supply and having additional cost around contractors. I mean that's minimized a fair bit, and the team has been working hard to improve their margins. So we were at the bottom of the curve. Probably, last year was moving the way back up with our margin improvement. So it's a mix of things, and that's a focus from the management team to do it what they always do.
Q: Just again following up on the guidance commentary in light of the comments that you have made thus far and the expectations through to '25. Am I right to assume that at an operating level, you're still expecting some reasonable earnings growth on that front? And then ultimately, that more modest guidance you have given out in today is largely the Patrick drag, the Moorebank drag and also that interest step up?
A: Yes, that's exactly right, Anthony. So a strong continued good growth in the operating business. Patrick coming back because of its over performance last year, higher interest costs, and then the impact predominantly of the increased losses on the Interstate JV. It's really -- it gets down to those big numbers.
Q: With your upgrade to your return hurdle to 12%, I'm just interested in your comment a second ago that you had that target internally for a while. Can you just talk about, I guess, what you're seeing out there? You seem to have been reasonably active with M&A at least at the larger end over the last year or so compared to prior years? But are you thinking that that hurdle rate needs to be higher? And if so, can you -- higher than in the past, but can you dig into, I guess, the drivers of say why you landed on a higher number?
A: I think we think can achieve the quality of our business, the size of our business, have we get synergy benefit going forward with putting acquisitions or better infrastructure and buying assets quality after our business that allows us to get more synergy value. But in saying that, we'll buy businesses that may not achieve that rate. But we know in the long term, they're a great asset. So I'm not going to go away from that. So it's been a bit of a balance for us mean that we set 15%, but then we have highly the short-term thinking. So 12% becomes the number that we feel that we can continue to do what we do and invest for the long term, but also deliver good earnings.
Q: Just a really quick one to finish, the $190 million to $250 million range that you've given them for asset sales, does that include any part of the interstate terminal at or bank?
A: It could. We've got a number of assets that we feel like, do we actually need to keep them? Is there a better owner of those assets? Is there a better use of our capital? And we're flagging that potentially -- there potentially might be some divestments. We're not selling anything we don't think that we'll need in the long term, or if we do sell it, we can use it out of the way like I mentioned before in the interstate. So to answer your question, yes, but it may not be the interstate terminal.
Q: Firstly, on the proposed MIRRAT acquisition. Could you give us a bit of an update on your level of confidence or progress on achieving the required approvals, for example, with the ACCC? And then whether or not you've got strategic plans for that asset that are greater than just continuing the railroad services? Are there options to use the space differently.
A: Yes. We're making good progress. There is the ACCC has given a
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
