AURIZON BOOSTED BY BOOMING WEST

WESTERN Australia’s booming iron ore industry has boosted Aurizon’s (AZJ) earnings in the first half of FY13.

An 89 per cent increase in iron ore volumes in the west, which boosted iron ore haulage revenue by $99 played a significant role in the AZJ’s 36 per cent rise in EBIT to $356 million, the company reported today.

The result came despite flat coal railings of 97 million tonnes and a 3 per cent reduction in Queensland coal volumes, but that was offset by a 15 per cent increase in New South Wales.

Aurizon reported a 27 per cent increase in underlying net profit after tax (NPAT) to $222 million for the previous corresponding period (pcp).

Statutory NPAT was down slightly to $176 million from $196 million in the pcp, hit by redundancy payments of $88 million (pre-tax).

Underlying earnings before interest and tax (EBIT) rose 36 per cent to $356 million and revenue rose 9 per cent to $1.9 billion.

The market is not impressed, as AZJ shares dropped 6.3 per cent this morning to $3.945 per unit.

Aurizon managing director and CEO Lance Hockridge says the improvement in underlying earnings reflects ongoing progress implementing a reform and growth strategy.

Focus on customers and improvement in service capability since privatisation had secured a number of new contracts, including Whitehaven (up to 16mtpa), Rio Tinto (up to 12mtpa), Jellinbah (up to 4mtpa) and Cockatoo Coal (up to 3.5mtpa).

“These contracts have been negotiated under more favourable commercial terms than current legacy arrangements and provide significant growth for Aurizon well into the next decade,” says Hockridge.

The business reform program has also delivered $28 million to the bottom line.

“We expect these benefits to increase in the second half of this year.”