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AURIZON will take a $321 million impairment in the first half of FY17, $85 million of which is related to its transformation and redundancy program, it announced this morning.
The Brisbane-based company (ASX:AZJ) has reaffirmed its underlying EBIT guidance of $900-$950 million and total above-rail tonnages in the range of 225-275 million tonnes.
Of the impairments, $162 million is related to the Intermodal business, which didn't meet performance expectations during the first half. The residual carrying value of the asset will be $177 million following the impairment.
The freight management transformation project is responsible for a $64 million impairment, as the company has terminated a standardisation project that aimed to bring 18 legacy systems into a single platform.
The company says this project was not delivering value to the business and was at a high risk of over-spend and delays.
Aurizon also exited a contract with Glencore to transport freight between Mt Isa and Townsville, which cost $10 million.
In the first half, 494 employees were made redundant as part of Aurizon's transformation project at a cost of $64 million. A further $15 million of property, plant and equipment was written off, and $6 million was charged for pulling out of various projects.
The company expects to take an impairment of $100 million in relation to the the restructure for the full financial year.
Managing director and CEO, Andrew Harding (pictured), says, "A key focus is getting the Company's core business right and continuing momentum with the transformation program. We will take a very disciplined approach to managing costs and capital to ensure we drive shareholder value.
"Despite these matters, the company remains on track with its FY2017 guidance and remains committed to its transformation targets through to FY18.
"I see great opportunity for sustained long-term improvements in productivity, efficiency and cost reduction."
Aurizon is trading up 0.41 per cent at $4.93 per share on the ASX this morning.
Business News Australia
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