Aurizon counts on cost cuts for growth as coal slump bites (updated)

GVK Power & Infrastructure

15/02/2016 24:19

* Aurizon pays out 100 pct of earnings 
    * Coal, iron ore rail projects on ice 
    * Underlying EBIT forecast in line with market 
    * Shares fall 1.8 pct 
 
 (Adds CEO comments, FY16 EBIT outlook) 
    By Sonali Paul 
    MELBOURNE, Feb 15 (Reuters) - Aurizon Holdings  AZJ.AX , 
Australia's top coal rail hauler, reported a 23 percent slide in 
first-half core profit on Monday, hit by weaker coal volumes and 
the loss of some contracts, and warned it saw little growth 
ahead except from cost cuts. 
    Oversupply, uncertain demand and weak prices have led 
Aurizon to shelve its two main growth projects - a coal rail 
line in the Galilee Basin in Queensland and the West Pilbara 
iron ore rail and port project in Western Australia. 
    With no growth spending on the horizon, the company paid out 
all of its first-half core profit of A$237 million to 
shareholders, raising its interim dividend by 12 percent. 
    Chief Executive Lance Hockridge declined to predict whether 
the West Pilbara project or the Galilee Basin rail line it had 
planned to build for India's GVK  GVKP.NS  and billionaire Gina 
Rinehart's Hancock Prospecting was more likely to go ahead 
within the next 10 years.  urn:newsml:reuters.com:*:nL3N14C169 
    "The immediate to medium term prospects are so clouded - I 
wouldn't want to hazard a guess as between either of those," he 
told reporters. 
    Underlying profit fell to A$237 million for the six months 
to December from A$308 million a year earlier, hurt by a 5 
percent drop in tonnages and an 11 percent drop in revenue. The 
result was just below a Citi forecast of A$241 million. 
    The drop included an A$18 million provision for debt owed by 
tycoon and politician Clive Palmer's Queensland Nickel refinery, 
which is in voluntary admninistration. 
    Aurizon reported a net loss of A$108 million, hit by A$426 
million impairments on the Galilee Basin coal rail project and 
the West Pilbara Iron Ore project. 
    The company narrowed its forecast for coal volumes to 
between 204 million and 209 million tonnes for the year to June 
2016, the second time it has trimmed the top end of its outlook 
this year. 
    It expects to report full year earnings before interest and 
tax between A$845 million and A$885 million, which is in line 
with market forecasts, according to Thomson Reuters I/B/E/S. 
    Aurizon said it would cut its forecast capital spending by 
up to A$200 million over the next 18 months and planned to cut 
at least A$380 million in operating costs by June 2018 to shore 
up its profit margins. 
    Its shares fell 1.8 percent, continuing their 
underperformance against arch rival Asciano  AIO.AX , which is 
the target of a heated takeover battle.  urn:newsml:reuters.com:*:nL3N15M0L5 
     
 
 (Reporting by Sonali Paul; Editing by Richard Pullin) 
 ((Sonali.Paul@thomsonreuters.com; +61 3 9286 1419; Reuters 
Messaging: sonali.paul.thomsonreuters.com@reuters.net)) 
 
Keywords: AURIZON RESULTS/