No matter how Aurizon tried to spin it, the 2021-22 results yesterday justified the 3%-4% or so slide in the share price.
The results were not a disaster, just weak and uninspiring and left the company defending its record via a reference to the $4.8 billion returned to shareholders in the past seven years and spruiking the benefits of the $2.4 billion One Rail deal.
But the most telling part of yesterday’s announcement was the 24% cut to the final dividend, which indicates a lack of confidence in the immediate future direction for the company
Aurizon shares did fall more than 7% at one stage yesterday to $3.785 before edging higher to end the day down 3.4% at $3.90 as investors got a little more upbeat about the report.
Revenue rose 2% to $3.075 billion (remember inflation was more than 6% in the year to June) and underlying EBITDA dropped 1% to $1.468 billion and underlying net after tax profit was off just 2% to $525 million.
But statutory next profit was off 15% to $513 million and that’s one line in the results investors focused on.
They also noticed the 24% slice to the final dividend to 10.9 cents a share, down from the 14.4 cents a share a year ago.
With the interim cut to 10.5 cents a share from 14.4 cents a year ago, the total for the year to June was 21.4 cents a share, down 25% from the 28.8 cents a share paid for 2020-21.
That certainly made investors sit up and take notice.
Aurizon reported a 6% fall in EBITDA in its network business compared to the previous corresponding period. The company reported an EBITDA of $801 million in 2020-22.
The fall was primarily driven by lower volumes, lower historical or catch-up revenue from the Wiggins Island Rail Project (WIRP) and lower Goonyella to Abbot Point Expansion (GAPE) fees (both in Queensland coal).
Aurizon’s EBITDA in its bulk business fell 7% to $130 million, followed by a year of consolidation and investment in future business growth. The business had to overcome challenges, such as floods and COVID-19 lockdowns that resulted in the lower volumes.
And Aurizon’s coal business reported a 1% rise in EBITDA of $541 million. It was driven by cost management, higher CPI favourably impacting contract rates and higher revenue yield.
It came as its customers snaffled all of the price gains from the booming export markets, especially for thermal coal.
Because of floods and wet weather, coal tonnages dropped 4% compared to 2021.
Based on this figure, Aurizon missed out in getting a part of the great Vlad Putin Energy Boom of 2022 that the likes of Yancoal, New Hope and Whitehaven have enjoyed.
Aurizon, though, remains confident the One Rail business will boost returns up until 2030.
As part of the greenlight from the ACCC for the One Rail deal, Aurizon has to divest the East Coast Rail (ECR) assets it acquired with One Rail.
A decision on that will be made in the December quarter.
Aurizon is expecting non-binding offers from potential trade buyers next month, with about 10 parties signing confidentially agreements.
These rail assets include coal haulage deals.
Aurizon is looking for the One Rail deal to diversify to more market-friendly commodities like as grains, copper and rare earths and away from coal.
That should give prospective bidders for the One Rail assets a big head up – coal so far as Aurizon is concerned, is no longer king.
