Shares in the rail group, Aurizon absorbed the news of yet another round of massive impairments and write downs yesterday, with the shares up 0.2% to $5.06, leaving them lower than when they started 2017 at $5.12.
That was after the company told the ASX late Wednesday that full-year earnings will be hit with $927 million worth of impairments and restructuring costs – the second set of swingeing write downs in three years – as the company’s struggling intermodal and bulk transport division continues to be a negative on earnings.
The losses, impairments and redundancy costs in 2014 and 2017 financial years have topped $1.8 billion
Aurizon said that it would post underlying earnings before interest and tax of $836 million for the 2016-17 year, in line with its revised April guidance of earnings before interest and tax of $800 million to $850 million. As a result the company looks like reporting a small loss for the year.
What it called “continued challenging market conditions” and the worsening performance of the company’s bulk and intermodal businesses – which carry containerised goods, bulk freight and pallets across the country – will see Aurizon take non-cash impairments of $526 million on its full-year earnings, as well as $401 million of other asset impairment and redundancy costs.
“The underperformance and deterioration in outlook for the bulk business is disappointing and serves to reinforce the need for disciplined action to effect a satisfactory business turnaround,” Aurizon chief executive Andrew Harding said.
“Bulk is well-positioned to leverage Aurizon’s core capabilities in operating bulk supply chains, yet is failing to deliver on its potential for customers and shareholders.”
The write downs come as new chief executive Andrew Harding finalises his first full-year results to be released on August 14. He took over from Lance Hockridge at the end of 2016.
Aurizon also confirmed that redundancy and other “transformation" costs would exceed $100 million, as previously forecast at its half-year results in February.
The company said the phased closure of the Rockhampton heavy maintenance workshop and changes to train crew operations in Queensland will lead to further impairments and redundancy costs of $80 million in the second half of 2016-17.
Mr Harding said the company’s important coal haulage business had performed strongly, apart from the impact of Cyclone Debbie in March and April, when landslides blocked rail lines from the central Queensland coal mines tothe big export operations on the coast.
Aurizon said it would provide more details of how it planned to improve the performance of the bulk business when it released its full-year results in August.
No mention was made of a final dividend policy in the wake of the write-downs and the gloomy outlook for parts of the business. The interim of 13.6c a share was raised 20%, even though the company knew many of the write downs had been made in the first half.
