Australia's largest freight rail operator swung to a half year net loss on the back of higher-than-estimated impairments.
Aurizon reported a net loss of $108 million after taking impairment charges of $426 million in its results, mainly related to its iron ore rail and port project in Western Australia, and delays to a planned rail network in Queensland’s Galilee Basin.
The company in December flagged an impairment of up to $240 million in the half year results, but on Monday said it had been forced to write down a further $186 million.
“Our underlying business is strong and resilient but we need to respond rapidly in a very challenging business environment for our customers,” chief executive Lance Hockridge said.
Underlying earnings for the six months ended December 31, which exclude the one-off charges, fell 17 per cent to $403 million.
The company’s revenue fell 11 per cent from a year ago, as a continuing slump in commodities prices sinks demand for its services, with most mining customers moving to cut back volumes and slash spending.
Aurizon trimmed outlook for coal volumes for the second time, narrowing its forecast to between 204 million and 209 million tonnes for the fiscal year to June 2016. The sector accounts for most of the company’s business.
It also said the West Pilbara Iron Ore project is unlikely to proceed in the medium term because of the slump in iron ore prices.
The company said in December work at the $6 billion project in WA, where it was to develop rail and port infrastructure, had been stopped. The project partners, which include China’s Baosteel and South Korea’s POSCO, will review the situation at the end of the March quarter.
Its other growth project, the Galilee Basin rail line it plans to build for India’s GVK and Gina Rinehart’s Hancock Prospecting, is also likely to be delayed in the medium term.
The company said it is reducing its own capital expenditure by $150 million to $200 million over the next 18 months, and is setting up a unit to identify cost-cutting opportunities.
“There will be minimal spend going forward. The focus is on value protection,” Mr Hockridge said on an analyst call.
Aurizon expects little growth in the near term, with full year earnings in the range of $845 million to $885 million.
- H1 loss of $108 mln vs $308 mln profit
- H1 revenue $1.76 bln, down 11 pct
- Dividend of 11.3 cents, up 12 pct