Lending Association

Aurizon boosts interim dividend amid favourable weather conditions

The absence of La Nina-driven rain and flooding events in the coal fields and ports of central Queensland and the NSW Hunter Valley helped rail freight giant Aurizon boost its interim dividend by 39% to 9.7 cents a share for the December 31 half-year.

The absence of any significant disruption – unlike the two previous years – from the very wet weather allowed the rail company to run as close to normal as possible across all commodities and freight, including coal.

The boost to the 60% franked payout, from 7 cents a share in the previous period, came on a 26% lift in EBITDA to $847 million, with the full-year guidance maintained.

Free cash flow leaped to $256 million for the half from $95 million a year, which saw CEO Andrew Harding hint at an “increase (in) shareholder returns” in 2024-25.

Revenue rose 16% to $1.97 billion in the latest half-year as above-rail coal volumes rose 4%; Network volumes up 3% and bulk volumes up 1%.

Statutory net profit jumped 80% to $237 million with the absence of one-off items. Underlying net profit after tax of $237 million was up 40% from the $169 million in the December 2022 half-year.

Aurizon said its coal EBITDA increased 23% or $53 million to $283 million “with higher revenue resulting from increased volumes (up 4%) and improved revenue yield due to the mix of volume between corridors and customers, in addition to CPI indexation.”

“Bulk EBITDA increased $12 million (12%) to $112 million driven by volume recovery and new contracts, offset by customer-specific production issues and lower grain volumes.

“Network EBITDA increased $123 million (34%) to $486 million in 1HFY2024, driven by a recovery in volumes (up 3%) and an uplift in the Maximum Allowable Revenue as a result of the reset of the Regulated Asset Base and the preliminary Weighted Average Cost of Capital applying to tariffs from 1 July 2023.”

CEO, Andrew Harding said in Monday’s release that “This was a strong result for the half, underpinned by solid performance in the Network and Coal businesses and with continued revenue and volume growth in Bulk and Containerised Freight.

“Further investments were made during 1HFY2024 in new rolling stock, port, and terminal equipment across our national footprint and will continue in 2HFY2024 aligned with equipment delivery.

“This will ensure Aurizon is well-positioned for current growth opportunities, as well as emerging markets.

“The cash flow that Aurizon is generating provides more flexibility to increase shareholder returns in FY2025.

“Across the business, we have secured new work, contract extensions, and commenced railings for new customers.”

Looking to the rest of the financial year, the company warned of the impact from Cyclone Kirrily in parts of northern Queensland and the Northern Territory in January and February.

Aurizon said it’s assuming no other problems happen in the June half-year, which means “Group underlying EBITDA guidance for FY2024 has been maintained at a range of $1,590 million – $1,680 million.

Sustaining capex is expected to be $600 million – $660 million (including ~$40 million of transformational project capital) and growth capex is expected to be $250 million – $300 million.”