Writedowns and costs have weighed on freight rail operator Aurizon’s half year profit, but its shares have risen due to its positive forecasts.
Australia’s largest freight rail operator expects to haul more coal this year than previously forecast, but has suffered a fall in half year profit.
Despite a long downturn in the Australian coal market, Aurizon chief executive Lance Hockridge said the company was transporting record volumes of coal for export from local mines.
Formerly known as QR National, Aurizon has increased its guidance for coal haulage in the 2013/14 financial year to between 207 and 212 million tonnes, up from its previous forecast of between 200 and 205 million tonnes.
The stronger volumes of coal have prompted analysts to lift their full year profit forecasts for Aurizon.
The company’s shares gained nine cents, or 1.8 per cent, to $5.19, despite it posting a 39 per cent fall in profit in the first half of the financial year.
The result included $197 million in writedowns, due to it reducing its number of locomotives and wagons, and delays or changes to major infrastructure projects it is involved in.
Aurizon also had $25 million in costs after 262 employees took voluntary redundancy packages during the six months to December 31, as it continued to downsize after its privatisation in 2010.
It made a net profit of $107 million in the six months to December 31, down from $176 million in the same period a year earlier.
Mr Hockridge highlighted Aurizon’s achievements in cutting costs, which mirror the efforts of its coal mining customers.
It cut $59 million from its cost base in the first half of 2013/14, and aims for a reduction of $90 million for the year and $230 million in annual reductions by the 2014/15 year.
“In summary our trains are running faster with bigger payloads, lower fuel, operating costs and on a smaller maintenance footprint,” he said.
Mr Hockridge said economic headwinds continued to affect the company, particularly efforts by local miners to slash costs to stay competitive against overseas rivals, and the fall in the value of the Australian dollar.
He cited the BHP Billiton Mitsubishi Alliance in Queensland, which is trying to cut $1 billion of costs out of its Queensland coal operations.
Mr Hockridge also conceded Aurizon faced the possibility of industrial action from its 200 NSW train drivers in the coming year.
The NSW workers are headed for protected industrial action after receiving Fair Work Australia approval, and Queensland workers could possibly do the same as new workplace agreements are negotiated.