A ho-hum reaction from investors to the latest part of Aurizon’s ongoing “transformation” program with claimed benefits of this time of up to $380 million over the next three years.
Details of the new plan were released at an investor day for the rail giant that saw newish chairman Tim Poole emerge to sell the company’s continuing makeover.
The company’s shares eased 0.4% to $5.13.
AZJ 1Y – Aurizon ramps up "transformation" program
The savings will underpin a targeted operating ratio of 70% by that time, compared to 74.3% in the year to June this year.
Aurizon said between $310 million and $380 million in benefits will be delivered through productivity improvements in its operations and reducing costs in corporate support areas.
“Subdued commodity prices, resulting in a lower volume and revenue growth outlook for Aurizon in the short – to medium-term, means that more than ever we need to ramp up our transformation program,” CEO Lance Hockridge said in a statement with the presentation for the investor day.
The streamlining of its operations is forecast to save between $250 million and $300 million, while further cost cuts in the area of corporate support are expected to save tup to $80 million.
The company claimed its 2015 result was helped by the realisation of $252 million in transformation benefits in the two years to 30 June 2015, as well as continued improvement in both above and below rail financial performance.
In the year to June 30 Aurizon posted a statutory net profit of $604 million, up 139% on the previous year’s $253 million, which was hit by almost $400 million of charges, including $69 million for its voluntary redundancy program and $317 million in asset impairments.
Underlying profit for fiscal 2015 rose 15% to $604 million.
Mr Hockridge said subdued commodity prices, resulting in a lower volume and revenue growth outlook for Aurizon in the short to medium-term, meant that the company needed to ramp up its transformation program.
“After five sustained years of reform at Aurizon since IPO, we know the next wave of productivity improvement will be harder,” Mr Hockridge said yesterday.
"We need to get leaner, smarter and more efficient in the services we provide our customers who are operating in an extremely tough environment."
Aurizon said it is implementing more modern and flexible work practices that are available in new Enterprise Agreements agreed in Queensland this year for approximately 5,000 employees. “This will contribute significantly to improved performance and lower operating costs,” the company said in yesterday’s presentation.
“The changes acknowledge a tough economic environment for Aurizon’s customers, especially in the resources sector, and the short to medium term impact this is having on freight tonnages and revenue,” it added.
