While everyone, especially the media wanted to know what his thoughts on the move to gazump the Brookfield bid for Asciano (AIO), Qube (QUB) chair, Chris Corrigan yesterday, made sure shareholders fully understood the tough outlook the logistics group faces in the next year.
He told yesterday’s annual meeting in Sydney that first quarter underlying earnings were in line with expectations and the company is facing weak trading conditions in the year ahead for its key ports and bulk division, especially the iron ore cartage and handling business in the Pilbara.
Qube shares were down 1.25% at the close yesterday to $2.37 against a market fall of 1%.
Mr Corrigan said the company expected trading and economic conditions to "remain difficult" in fiscal 2016.
"As previously announced, Qube expects that, excluding the contribution from any new contracts or acquisitions, the underlying earnings from the ports and bulk division will be lower," he told shareholders yesterday.
Overall earnings this financial year will benefit from a full-year contribution from acquisitions and earnings contributions from Moorebank and Quattro.
Mr Corrigan said the expected earnings dip in the ports and bulk division was the result of the conclusion of "three significant contracts" and the revised terms of its Atlas contract which occurred in the second half of last financial year.
The chairman said the underlying performance of the company had met expectations in the first quarter despite weaker revenues in some areas.
"The continued focus on cost reductions and delivering ongoing operational efficiencies has offset weaker revenue in some parts of the business," he said. Qube’s underlying net profit after tax rose 19% to $105.2 million in the 2014-15 year ending June 30.
QUB 1Y – Qube warns on ‘difficult’ conditions
On its $9 billion bid for Asciano with two offshore infrastructure investors, Mr Corrigan said Qube and its partners expect to complete due diligence on Asciano by mid-December, with the company “confident” the proposal addresses Australian Competition and Consumer Council concerns.
The competition watchdog earlier this month stepped up its review into the proposed Qube consortium bid by formally notifying a review. The ACCC is also studying rival bidder Brookfield’s proposal after raising concerns about competition factors. It will announce a decision around December 17.
Mr Corrigan told the meeting that the acquisition of Asciano “would be highly accretive to Qube shareholders in the medium term”.
He said after the meeting that Qube could continue to hold its 19.99% stake in Asciano “indefinitely.” He told media “that’s not a financial burden for us.”
Mr Corrigan said Qube had no interest in the Pacific National rail business of Asciano because it was “a totally different” business to Qube’s existing rail operations, which consist of rail links to and from ports.
Qube did not believe it needed to raise its indicative bid to win over Asciano shareholders but had not ruled out a potential increase, Mr Corrigan added.
He told the media that he did not believe Brookfield could use its stake in Asciano to block a sale of Patrick’s ports business to Qube, adding that the consortium also believed it could split up Asciano without Brookfield’s agreement.
