THE state’s biggest rail freight company is optimistic it can still deliver on its coal volume targets despite slow recovery from a summer of disasters.

QR National (QRN) is tooting with confidence about meeting coal volume targets for the 2012 financial year.

It comes after lingering impacts of the 2011 Queensland floods and industrial relations issues, which hindered coal volumes in first half of fiscal 2012.

Managing director and CEO Lance Hockridge (pictured) confirmed spirit is still strong, predicting QRN will deliver 200 million tonnes (mt) of coal – the low end of previous guidance provided.

“Our Queensland coal tonnages, were down by 7 per cent compared to the year earlier. On the other hand, that was offset by the 34 per cent increase in our volumes in the Hunter Valley that we’d signalled and spoken about as part of the change, the reformation, the growth in our business,” he says.

“We are starting to see the recovery of coal railings that we had hoped for, although production and industrial relations issues are impacting some of our customers, which we are dealing with.”

He predicts an expected volume downside in FY12 earnings before interest and tax (EBIT) will be offset by the corporate transformation program, while capital expenditure will total $1.1 billion due to the deferral of uncommitted projects.

“We expect that the tonnages will be at the very low end of the range that previously we gave, in other words around 200 million tonnes, albeit there continue to be those ranges of uncertainties in the businesses,” says Hockridge.

The state’s biggest rail freight company is optimistic it can still deliver on its coal volume targets despite slow recovery from a summer of disasters.

“The projects that we have underway will deliver an additional 71 million tonnes of rail capacity into our Central Queensland coal network by 2015. This is subject to normal seasonal rainfall and customers returning to pre-flood production levels.”

QRN reported a $189 million net profit after tax for the first half of FY12, a 32 per cent drop on the previous corresponding period. Revenue increased by 1 per cent to $1.8 billion, EBIT rose 98 per cent to $260 million and coal volumes fell 2 per cent to 97.5 mt in the same period.

The changes were largely due to a significant tax credit of $281 million, which arose during the former State Governmentowned company’s privatisation. Provision of $8.8 million was reversed for the first half of fiscal 2012, following a favourable stamp duty assessment arising out of the privatisation process.

However, Hockridge is still upbeat about the results.

“This is a quality result in challenging circumstances and builds on the momentum achieved by the company over the past financial year. We continue to improve the efficiency of the business as well as lifting revenue quality,” he says.

The company expects to increase iron ore ‘throughput’ from about 10-30 million tonnes in coming years. The $6 billion Oakajee port and rail project will also play an important part in this.

“The throughput of about 30 million tonnes takes up the vast majority, if not all the existing port infrastructure in Western Australia. So the ability to be able to lift those volumes beyond the 30 million tonne level will be dependent on port development in Western Australia, key and central to which is the Oakajee development,” says Hockridge.

“We have (also) opened the Northern Missing Link and taken the GAP project to 50 million tonnes. We know that we can take that corridor capacity to 200 million tonnes and beyond.”

QRN countered industrial action by undertaking major capital upgrade works.

“We have taken the opportunity of doing work for example, in the Goonyella Balloon Loop during this period. It would have been 100,000 tonne a day impact if we had to do it at another time,” says Hockridge.

QRN has $919 million in net debt, which is gearing at 11 per cent.

The board declared an unfranked interim dividend of 3.7 cents per share to be paid on April 30.


QR National (QRN)
MD: Lance Hockridge
Market Cap: $9.418b
Revenue ’11: $3.196b
Profit ’11: $349.5m
Staff: 9400
Established: 2004

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